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(Bloomberg) — Preliminary conclusions of the Swiss parliamentary commission reviewing the 2023 collapse of Credit Suisse sharply criticize the financial regulator Finma as well as the country’s central bank and the Federal Council, according to a report in SonntagsZeitung.
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Authorities were unprepared to prevent or contain the break-up of the company, even though the bank had been classified as systemically important for years and its problems obvious for many months, the newspaper reported.
That would echo the findings from an earlier report by Paul Tucker, the former Bank of England deputy governor who’s now a fellow at the Harvard Kennedy School, that formed the basis of the “Too Big to Fail” report by Swiss finance department in April.
SonntagsZeitung didn’t say where it obtained the parliamentary report. Representatives from the committee, the Swiss finance ministry and Finma declined to comment to Bloomberg News. The final outcome of the investigation is expected by the end of the year.
The critique of Finma, the Swiss banking watchdog, centers on a lack of assertiveness, according to SZ. The report adds that Finma should have greater powers, something that Switzerland’s government has considered; so far it’s stopped short of giving the regulator the power to fine banks.
After the collapse of Credit Suisse and its takeover by UBS Group AG, Switzerland is grappling with how to handle an outsized financial sector dominated by a behemoth bank that’s more than twice the size of its economy.
The Swiss National Bank wasn’t spared in the interim conclusion, according to Sunday’s report. In particular, the central bank was said to be extremely restrictive in granting emergency liquidity and didn’t point out these issues early enough when Credit Suisse got into trouble.
“Credit Suisse did not exploit the potential for liquidity assistance with its preparatory work,” the central bank said in a statement to SonntagsZeitung. “Firstly, the conditions for legally valid collateral were not met for certain assets. Secondly, a significant portion of the assets in question were already encumbered or involved in other financial transactions of the bank.”
Ueli Maurer, the Swiss finance minister between 2016 and 2022, will also be faulted for authorities’ insufficient preparation when Credit Suisse started to unravel, according to SZ.
The commission’s final report is likely to shed light on the decision-making process during the frenzied weeks that preceded the takeover.
Lawmakers, who had judicial powers to subpoena witnesses and access the minutes of government meetings, heard testimony from more than 60 witnesses, including the responsible ministers and representatives of Finma, the central bank, Credit Suisse and UBS, according to SZ.
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