In the wake of the tumultuous collapse of Credit Suisse, Switzerland’s financial watchdog, FINMA, has stepped into the spotlight, advocating for an expansion of its regulatory powers. This move is not just a reaction to a single financial debacle but a clear signal of a shifting paradigm in the Swiss banking sector’s oversight. The downfall of Credit Suisse, a 167-year-old banking institution, didn’t just rattle the foundations of Swiss finance; it exposed glaring gaps in regulatory mechanisms.
A call for enhanced oversight
FINMA’s 84-page report on Credit Suisse’s failure, loaded with intricate details of the bank’s unraveling, underscores the need for more robust regulatory tools. The report criticizes the bank for its lackluster implementation of strategic focuses, a series of scandals, and management blunders.
To prevent such a fiasco from recurring, FINMA suggests empowering regulators with the ability to impose fines on financial institutions and introducing a senior managers’ regime. This proposed regime, mirroring the UK’s system, aims to enforce greater personal accountability among top executives.
The call for these reforms resonates with the sentiments expressed by Sergio Ermotti, UBS’s chief executive. His endorsement of a comprehensive reform package, proposed by a government-appointed panel, signals a growing consensus among Swiss financial leaders about the urgency of regulatory overhaul. The findings of the parliamentary group, which scrutinized Credit Suisse’s near-collapse, emphasize a perceived weakness in FINMA’s current crisis management capabilities.
The rigor of FINMA’s supervision
In its self-reflective report, FINMA detailed its supervisory approach during Credit Suisse’s tumultuous final years. From 2012, the regulator engaged in an exhaustive oversight process, including 43 preliminary investigations, numerous reprimands, criminal charges, and enforcement proceedings. Remarkably, a significant portion of these actions took place after 2018, highlighting an intensified regulatory focus in recent years.
FINMA’s records reveal a staggering 108 on-site supervisory reviews at Credit Suisse between 2018 and 2022, documenting 382 action-required points, with a substantial number classified as high or critical risk. These figures reflect a regulatory body at its operational zenith, employing every tool within its legal arsenal. Despite these efforts, the eventual collapse of Credit Suisse has led to an introspective examination within FINMA and calls for expanded regulatory powers.
The pursuit of enhanced regulatory authority by FINMA is set against a backdrop of global financial uncertainty and the increasing complexity of financial products and services. The Swiss financial sector, traditionally viewed as a bastion of stability and discretion, is now grappling with the realities of modern banking vulnerabilities. The Credit Suisse saga serves as a wake-up call, not just for Swiss regulators, but for global financial watchdogs, emphasizing the need for agility, foresight, and stronger enforcement mechanisms in banking supervision.
In essence, the Credit Suisse crisis and FINMA’s subsequent call for more power mark a pivotal moment in Swiss banking regulation. It’s a tale of introspection, adaptation, and the relentless pursuit of financial stability in an ever-evolving economic landscape. As FINMA seeks to bolster its regulatory clout, the global financial community watches closely, recognizing that the repercussions of these changes will echo far beyond the Swiss Alps. The journey ahead for FINMA and the Swiss financial sector is not just about recovery from a historic downfall, but about redefining the very essence of banking oversight in an increasingly interconnected and complex financial world.