For 167 years, Credit Suisse was sustained - until March of this year when Swiss authorities orchestrated a rescue from competitor UBS after a series of missteps in risk management, scandals, and trust erosion among clients and investors. In the four-year period of 2018-2022, FINMA - the Swiss regulator - conducted 108 visits at Credit Suisse and discovered 382 areas in need of improvement - of these, 113 were labeled as high or critical risk. The regulator then sought the implementation of extended options to allow it to be more influential in the oversight of supervised institutions.
On Tuesday, the Swiss Financial Market Supervisory Authority (FINMA) called for greater legal powers and noted that it was obliged to adapt its approach in light of the Credit Suisse collapse. The 167-year-old bank had to be rescued by UBS back in March, which was facilitated by Swiss authorities, due to a series of risk management mistakes and scandals which caused a major exodus of clients and investors. FINMA's Tuesday report emphasized the "far-reaching and invasive measures" it had taken to monitor the bank, fix any deficiencies, particularly related to corporate governance, risk management, and risk culture. The regulator also warned that starting from summer 2022, Credit Suisse should make "various preparations for an emergency" - which appears to have gone unheard.
FINMA noted in its report that it recommends a stronger legal basis, such as the Senior Managers Regime, the ability to issue fines and more stringent rules for corporate governance. It added that it will be adapting its supervisory approach in certain areas and will be closely reviewing whether stabilisation measures are ready to apply.The regulator said that Credit Suisse's strategic changes, such as reducing its investment banking activity, focusing on its asset management and decreasing its earnings volatility, were not always accordingly implemented, and that recurrent scandals contributed to its reputation damage. It observed too that even in financially difficult years, variable remuneration stayed high and shareholders seldom used their rights to influence it.Between 2012 and the bank's rescue, FINMA conducted 43 investigations about potential enforcement operations. From those, nine reprimands were given, 16 criminal charges submitted and 11 enforcement proceedings were initiated against the bank and three against individuals.FINMA affirmed that it repeatedly pointed out the risks to Credit Suisse, proposed improvements and enforced important decisions, comprising of substantial capital and liquidity requirements, interventions in the bank's governance and remuneration, and limitations on business activities.
From 2018 to 2022, FINMA conducted 108 on-site supervisory reviews of Credit Suisse, identifying 382 points for action, 113 of which were assessed to be of high or critical risk. The regulator's extensive actions demonstrate its readiness to utilize all its options and legal powers. Credit Suisse executives attributed the deterioration in confidence to the market shock resulting from Silicon Valley Bank's collapse in the U.S. In the summer, FINMA instructed Credit Suisse to develop crisis-contingency measures, including possible partial or full business divestments in an emergency scenario. Accordingly, the regulator proposed the adoption of a Senior Managers Regime, the implementation of penalties, and the publication of enforcement decisions to enhance its ability to intervene with supervised institutions. Finally, it was concluded that a more secure legal mandate is needed to effectively address payment systems.
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