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The Swiss banking regulator has ordered embattled Raiffeisen to consider ditching its bulky cooperative structure in favor of incorporating. finews.com explains why it matters. 

Earlier on Thursday, Swiss Finma issued a regulatory rebuke of Raiffeisen following an enforcement proceeding sparked by alleged misdealings by former CEO Pierin Vincenz. The overseer buried what may be sanction with the most wide-ranging implications at the end the five-page reprimand.

«Raiffeisen Switzerland is also required to examine in detail the pros and cons of converting Raiffeisen Switzerland into a limited company», Finma wrote. The bank's cooperative lending structure «have a significant impact on corporate governance requirements», the regulator wrote.

The decentralized structure is cited by banking experts as a key element in what is referred to as the Vincenz system, in which the long-standing CEO allegedly took a personal financial stake in Raiffeisen deals. Vincenz, who was released from nearly four months of custody on Tuesday, said he will fight criminal charges.

Hybrid Model?

Finma's recommendation, which the regulator has no legal basis to actually enforce, is explosive for the 219-year-old cooperative lender, which is made up of 255 autonomous banks with 912 branches and 1.9 million member-owners. 

«Finma can forget that straight away», a Raiffeisen banker who requested anonymity because he is not authorized to speak to media told finews.com.

Raiffeisen itself, based in St. Gallen, took a neutral tone: the bank said it would evaluate its legal structure as part of the wider discussion about its cooperative form, it said in a statement (in German). While the criminal investigation against Vincenz has given the idea of incorporating the cooperative renewed impetus, the idea isn't entirely new.

Simpler Finma Job?

Swiss daily «Neue Zuercher Zeitung» (in German, behind paywall) suggested in April that Raiffeisen adopt the model of Mobiliar. The Swiss insurer has carved out the operative and strategic leadership into a stock holding. This represents the best of both world – shareholder and cooperative – the paper wrote.