Credit Suisse Collapse Probe Slams Banking Regulator

Switzerland's financial regulator was ineffective in tackling the scandals at Credit Suisse, where executive mismanagement scuppered the bank and nearly triggered a global financial crisis, a Swiss inquiry concluded Friday.

"Credit Suisse's long-term mismanagement is the cause of the crisis," a parliamentary commission of inquiry said, following an 18-month investigation raking over the dramatic March 2023 collapse of one of the world's biggest banks.

"The board of directors and management of Credit Suisse in recent years are responsible for the loss of confidence in the bank."

The probe found no evidence that the implosion of Credit Suisse was caused by misconduct on the part of the authorities.

Switzerland's second-biggest bank was among 30 international banks deemed too big to fail due to their importance in the global banking architecture.

But the collapse of three US regional lenders in March 2023 left Credit Suisse looking like the weakest link in the chain and its share price plunged more than 30 percent on March 15 last year.

The Swiss government, the central bank and the Financial Market Supervisory Authority (FINMA) then strongarmed the country's biggest bank UBS into a $3.25-billion takeover announced on March 19 before the markets reopened the following day.

The government feared Credit Suisse would have quickly defaulted and triggered a global banking crisis that would also have shredded Switzerland's valuable reputation for sound banking.

The authorities' actions "avoided a global financial crisis", according to the more than 500-page report.

The commission levelled numerous criticisms at the financial market regulators, saying it "deplores the partial ineffectiveness of FINMA's supervisory activity".

It said it did not understand why, back in 2017, FINMA granted "vast capital relief" without which Credit Suisse would have "had difficulty meeting regulatory requirements" four years later, and "would have been absolutely incapable of doing so from 2022".

FINMA had issued several warnings and launched numerous procedures against the bank, the commission said, but found Credit Suisse's managers had been "reticent" when the regulator intervened.

FINMA criticised the remuneration of top executives, but came up against "the bank's reluctance -- and that's a polite way of putting it", commission member Roger Nordmann told a press conference in Bern.

However, the inquiry "has not identified any misconduct by the authorities that caused the Credit Suisse crisis".

The merger raised serious concerns in Switzerland around jobs, competition and the size of the resulting bank relative to the Swiss economy.

The inquiry was set up in June 2023 and tasked with investigating the role of Swiss authorities in the emergency merger of Switzerland's second-biggest bank into its larger domestic rival UBS.

It was composed of 14 lawmakers -- seven from each house of parliament -- with all the major parties represented.

It was only the fifth parliamentary committee inquiry ever held in Switzerland and the first since 1995.

The commission looked at events from 2015 onwards to identify the factors that led to the bank's downfall, and examined more than 30,000 pages of documents.

The inquiry criticised the rules applicable to banks deemed too big to fail, finding that the government and parliament had placed "too much importance" on the demands of the big banks.

The commission made 20 recommendations to the government, which welcomed the report's "positive view of the authorities' actions in the Credit Suisse crisis and of the solution chosen with the takeover by UBS".

"It calmed the markets and averted a financial and economic crisis," a statement said.

It agreed that the crisis exposed "weaknesses of the existing too-big-to-fail regulations".

FINMA said it understood the criticism of how it implemented the "regulatory filter" in 2017.

It said the introduction of a responsibility regime, the power to impose fines and the ability to intervene at an earlier stage would bolster supervision -- tools FINMA "has so far lacked compared with its international peers".

Meanwhile UBS said the report "confirms that the collapse of Credit Suisse was driven by years of strategic errors, mismanagement and reliance on substantial regulatory concessions".

But the bank continues to defend the idea that the rules must be adjusted in a targeted way to guarantee the competitiveness of the Swiss financial sector.