The Swiss banking regulator is making wide-ranging recommendations to Raiffeisen as a result of the scandal surrounding its former CEO Pierin Vincenz.
Finma is rapping Raiffeisen after concluding an enforcement proceeding against the bank, sparked by the criminal investigation against its former, long-standing CEO, Pierin Vincenz.
The bank will be required to evaluate the potential benefits of incorporating, from its current cooperative structure, the financial regulator said in a statement on Thursday. The St. Gallen-based bank's legal and group structure considerably weakened the effectiveness of Raiffeisen's corporate governance.
Free Hand
In Finma's review of the events, which have dominated headlines of Raiffeisen for months, Vincenz had a free hand to circumvent or bypass internal controls.
Specifically, the probe looked at the bank's purchase of a stake in Investment and KMU Capital. Finma also found wanting Raiffeisen's corporate governance in loans to Vincenz in order to finance his own stakes, alongside the bank.
Budget Overdrawn
Vincenz also overdrew the CEO budget for adviser expenses, retaining an associate, Beat Stocker, who was also arrested in the probe, in a pricey mandate for months.
Besides the governance slap, which is largely symbolic, Finma also ordered Raiffeisen to renew its board with more board expertise. The bank has to recruit at least two directors with experience in banking commensurate to Raiffeisen's size, the regulator said.
Board Renewal
As a cooperatively organized lender, Raiffeisen's board is comprised of overseers from its member banks as well as local politicians.
Finma also ordered Raiffeisen to seek at least one board member with compliance expertise that is appropriate for the bank's size, and to ensure that risk and audit committees had experience in those areas. In a separate statement, Raiffeisen acknowledged the Finma order (in German) and said it had already made several improvements.
