Swiss financial regulator calls for tougher powers after Credit Suisse collapse

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Switzerland’s financial regulator has called for tougher powers to oversee banks after claiming it did everything it could to try to prevent the collapse of Credit Suisse this year.

Finma on Tuesday published an 84-page report into the failure of Credit Suisse, which sent shockwaves through the Swiss financial system.

It found the 167-year-old bank’s downfall was the result of “inadequate implementation of its strategic focus areas, repeated scandals and management errors”.

Thomas Hirschi, head of Finma’s crisis unit and banks division, said the regulator spotted problems at Credit Suisse early and “used its full range of tools” to try to stabilise the bank.

“Although its actions had an effect, they were unable to overcome the causes of the loss of confidence, such as shortcomings in strategy implementation and in risk management,” he added.

Switzerland’s financial regulatory system has long been criticised internationally for lacking the authority of its global peers and allowing banks to operate with the threat of minimal punishments for misdeeds.

In the report, Finma said that to improve its oversight of the finance sector, it would need to be able to fine companies. It also called for the introduction of a senior managers’ regime, similar to the system in the UK, where there is much greater personal accountability for executives.

The calls echo those made last month by Sergio Ermotti, chief executive of UBS, which agreed to rescue Credit Suisse in March.

Ermotti was endorsing a package of reforms to Switzerland’s banking rules presented by a government-appointed panel of financial experts in September.

Among the main findings of the parliamentary group, which was tasked with analysing the near-collapse of Credit Suisse, was that Finma was too weak to handle banking crises adequately.

As part of its report on Tuesday, Finma set out in detail its approach to supervising Credit Suisse in its final scandal-plagued years.

Since 2012, Finma said it conducted 43 preliminary investigations into the bank for potential enforcement proceedings, issued nine reprimands, filed 16 criminal charges and completed 11 enforcement proceedings against the bank and three against individuals. It added that 11 of these 14 proceedings took place since 2018.

“Finma consistently informed Credit Suisse of risks, called for improvements, and imposed far-reaching measures,” the regulator said. “These included extensive capital and liquidity measures, interventions in the bank’s governance and remuneration, and restrictions on business activities.”

It said that between 2018 and 2022, Finma conducted 108 on-site supervisory reviews at the bank and recorded 382 points requiring action — 113 of which were classed as high or critical risk.

“These figures and measures illustrate that Finma exhausted its options and legal powers,” the regulator said.