CS-PUK report will point the way for further bank regulation
Published: Tuesday, Dec 10th 2024, 13:20
Updated At: Friday, Dec 20th 2024, 04:40
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The CS-PUK report announced for today, Friday, marks one of the most important milestones in the investigation into the Credit Suisse debacle. The final report sheds light on the behavior of institutions and individuals in connection with the downfall of Switzerland's second-largest bank. It will also influence Swiss banking regulation.
The Parliamentary Commission of Inquiry (PCI) set up in June 2023 took almost a year and a half to complete its work. Its remit was to investigate the conduct of the authorities in the context of the emergency merger of Credit Suisse with UBS in March 2023.
By the time the collection of information was completed in May 2024, the 14-member joint committee of the National Council and the Council of States had held more than sixty hearings with representatives of the government, authorities and banks. It also requested numerous documents.
Finma in focus
The PUK probably took a very close look at the management of the Financial Market Authority Finma under its chairwoman Marlene Amstad. After the CS debacle, the authority was criticized on various occasions for not being assertive enough.
The PUK investigated Finma's supervisory activities not only in the last few months of CS, but also in the "pre-crisis years" back to 2015. In these years, CS was repeatedly affected by negative incidents, including the "shadowing scandal", the Mozambique bond scandal and the bankruptcies involving the Greensill investment funds and the Archegos hedge fund.
The Swiss National Bank (SNB), led by its now resigned Chairman Thomas Jordan, was also directly involved in the CS rescue efforts from the fall of 2022 at the latest. The conduct of the SNB, which was responsible in particular for providing liquidity assistance to the ailing bank, could also be critically assessed by the PUK.
Possible omissions
In addition to representatives of the authorities, some politicians are also likely to be nervous about the publication of the final report. From the national government, Finance Minister Karin Keller-Sutter and her predecessor Ueli Maurer, who headed the Federal Department of Finance (FDF) until the end of 2022, are likely to be the focus of the investigations.
According to information leaked to the media in recent months, the PUK report could possibly accuse the former finance minister of failing to act. For example, he did not push for more decisive measures after the first wave of massive withdrawals from CS in the fall of 2022. In addition, Maurer is said to have inadequately informed his Federal Council colleagues about the true situation of the big bank.
Critical cooperation
The report should also provide an assessment of how well the various authorities - i.e. the Federal Department of Finance (FDF), the SNB and FINMA - worked together during the CS crisis.
In the fall, for example, media reports caused a stir, alleging that Maurer and Jordan had held unrecorded "secret meetings" with the last CS Chairman Axel Lehmann. The conspicuous absentee was Finma President Amstad.
Conclusions and recommendations
Any conclusions and recommendations from the PUK are also eagerly awaited. These will flow directly into the ongoing work on regulating the "too big to fail" banks (TBTF).
It remains to be seen how directly the PUK report will take a position on the controversial demand for more capital for systemically important banks in particular. In recent months, the banking sector and above all UBS CEO Sergio Ermotti have repeatedly opposed general increases in capital requirements.
The PUK could make clear recommendations regarding a possible strengthening of the institutions involved, especially the financial supervisory authority Finma. For example, FINMA would like more and stricter instruments for dealing with the supervised financial institutions, including the authority to impose fines. The banking sector has also signaled its clear opposition to such proposals.
New regulations from next year
In its report on banking stability in the spring, the Federal Council proposed a broad package of measures for the further development of TBTF regulation. In doing so, it expressly stated that it would incorporate the results of the CS-PUK.
The further timetable envisages that the Federal Council will probably issue the first amendments to the TBTF rules in ordinances in the first half of 2025. It is also likely to submit the first amendments at legislative level to Parliament.
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