In March 2023, the Swiss Confederation, the Swiss National Bank and FINMA instituted measures to safeguard Credit Suisse's solvency and finally assisted with the subsequent takeover of Credit Suisse by UBS (announced on 19 March 2023 and put into effect on 12 June 2023) to stabilise the market.
On 19 December 2023, FINMA published a report on the Credit Suisse crisis. The report covers (i) the development of Credit Suisse between 2008 and 2023 (including its business performance, risk management and preparation for crises), and (ii) FINMA's supervisory work with the bank.
In the report, FINMA identifies the main reasons for the failure of Credit Suisse. According to FINMA, the strategic changes (such as downsizing the investment bank, reducing earnings volatility, and focusing more on asset management) were never implemented consistently. FINMA states that Credit Suisse's reputation was undermined by recurrent scandals resulting in irreparable reputational damage. Despite extensive adjustments over the years, deficiencies in risk management identified by FINMA were never sustainably remedied. FINMA also notes that although the bank met regulatory capital and liquidity requirements, neither the regulatory capital nor the liquidity buffer could contain the loss of confidence in the bank.
Using Credit Suisse as an example, FINMA further examines problematic areas in its supervisory practice and suggests potential solutions. FINMA notes, among other things, its limited influence in matters of strategy and governance. According to FINMA, these deficiencies could be remedied e.g. by (i) a senior managers regime, (ii) powers to impose fines, or (iii) the option of publishing enforcement proceedings on a regular basis. FINMA further declares its intention to incorporate lessons learned from the Credit Suisse crisis when determining the liquidity requirements for systemically important banks as of January 2024.
The full report is accessible here. We will keep you informed on further developments. Should you have any questions with respect to financial regulatory laws in Switzerland, please reach out to the banking & finance team members in our Zurich office.