The Swiss Financial Market Supervisory Authority has presented its report on the Credit Suisse crisis. The authority is calling for more options for sanctions, stricter regulatory standards, and the ability to impose additional capital charges.
In the report on the downfall of Credit Suisse (CS) in March 2023, the Swiss Financial Market Supervisory Authority (FINMA) examines the events on the bank’s side and the strategic errors that led to the crisis. But it also critically examines its own role.
According to the paper presented on Tuesday, the statutory basis for supervision came up against its limits in this particular case. Finma used the full range of tools at its disposal, was quick to recognize the risk of a possible destabilization of Credit Suisse, and its actions did indeed have an effect. But it was unable to overcome the causes of the loss of confidence such as shortcomings in strategy implementation and in risk management at the bank, the report says.
Supervision Reached its Limits
«We’re committed to ensuring that the supervisory authority has even better cards up its sleeve. CS illustrates both the potential and limitations of supervision,» says Marlene Amstad, Chairwoman of Finma’s Board of Directors.
In terms of the outcome, the authority gives itself a favorable assessment, saying that the measures taken by the authorities in March 2023 were effective and fulfilled the legal mandate. The measures would have ensured creditors were protected and financial markets still functioned.
More Competences and Options for Intervening
Finma supports expanding competences and measures in the future. This includes a greater influence on governance, a senior manager regime, powers to impose fines, and the ability to regularly publish enforcement proceedings.
The authority says the legal obligation to provide relief for capital requirements has weakened parent companies at individual bank level. Moreover, the regulatory treatment of investments also had a procyclical effect during the crisis. Finma is therefore calling for stricter standards in regulations at individual bank level as part of the review of too-big-to-fail requirements.
Capital in Focus
In addition, risks and the resulting potential for losses should be analyzed more systematically in the future. If needed, it should be possible to impose additional capital charges and also make this public.
With regard to recovery plans, Finma will place a stronger focus on the effective feasibility of the measures and consider tightening the approval process. Resolution planning should also be structured to address faster bank runs and more crisis scenarios.
More to follow.
