Table of Contents
Key Lessons and Reforms from Switzerland’s Report on the Credit Suisse Collapse
1. Revising Too-Big-To-Fail (TBTF) Rules
The report highlights the disproportionate size of UBS compared to Switzerland’s economy following its acquisition of Credit Suisse. It calls for updated TBTF regulations to prioritize financial market stability and ensure the resilience of the Swiss financial system.
2. Accountability for Bank Executives
Credit Suisse’s management was identified as a primary factor in the bank’s downfall. Proposed measures include:
- Limiting bonuses during poor financial performance.
- Increasing shareholder influence on stability-related decisions.
- Requiring a majority of board members to reside in Switzerland for at least 10 years.
3. Enhancing Financial Regulation
The financial regulator FINMA faced criticism for being too lenient. Recommendations include:
- Reducing banks’ ability to lower capital and liquidity requirements.
- Granting FINMA powers to impose fines, limit share buybacks, and restrict dividends.
- Consolidating audit oversight for systemically important banks under FINMA.
4. Introducing a Public Liquidity Backstop
The committee supported establishing a government-backed liquidity facility for crises. This measure aims to prevent panic-induced withdrawals by ensuring banks can access emergency funds without delay.
5. Improving Information Sharing and Transparency
The report noted poor communication and lack of documentation during the crisis. Recommendations include:
- Enhancing information-sharing protocols among key officials.
- Keeping detailed records of crisis-related discussions to improve decision-making.
These findings aim to strengthen Switzerland’s financial system and prevent future crises of this magnitude.