Swiss financial regulator FINMA is reportedly considering disciplinary action against Credit Suisse managers following the bank’s rescue by UBS last week. The regulator’s main focus is on “the transitional phase of integration” and “preserving financial stability”, according to FINMA President Marlene Amstad.
FINMA stands for Swiss Financial Market Supervisory Authority, which is Switzerland’s financial regulatory authority responsible for supervising banks, insurance companies, stock exchanges, and other financial institutions.
Its main task is to ensure the stability of Switzerland’s financial system and to protect investors, depositors, and policyholders. It is an independent organization established by the Swiss parliament in 2009 to consolidate the supervision of financial markets previously undertaken by three separate supervisory authorities.
UBS agreed to acquire Credit Suisse for $3.26 billion in stock and to assume up to $5 billion in losses in a merger engineered by Swiss authorities during a period of market turmoil in global banking.
The collapse of Credit Suisse has been attributed to a “cultural problem” that resulted in a lack of responsibility, with numerous mistakes made over several years. FINMA has previously conducted six public enforcement proceedings against the bank. Credit Suisse declined to comment on the potential disciplinary action.
FINMA might hold current Credit Suisse managers accountable for all turmoil
According to FINMA President Marlene Amstad, the regulatory body is considering disciplinary action against Credit Suisse managers in the aftermath of the bank’s recent bailout.
While Amstad noted that new proceedings are still under consideration, she emphasized the regulator’s main focus on the “transitional phase of integration” and “preserving financial stability.”
In response to criticisms of the decision to write down 16 billion Swiss francs of Credit Suisse Additional Tier 1 (AT1) debt to zero as part of the bailout, Amstad defended the move as consistent with the terms of the AT1 instruments, which contractually provide for full write-offs in the event of extraordinary government support.
Urban Angehrn, FINMA’s CEO, also defended the regulator’s intervention in Credit Suisse’s affairs prior to the takeover, stating that despite lacking the ability to issue fines, FINMA had used its “sharp instruments” effectively. Angehrn further noted that discussions are ongoing about potentially expanding FINMA’s competencies to hold managers accountable and improve communication in such cases.
If Swiss financial regulator FINMA takes disciplinary action against Credit Suisse, it could lead to various consequences for the bank and its managers.
Depending on the severity of the disciplinary action, Credit Suisse could face fines, legal action, or restrictions on its operations. Additionally, the reputational damage caused by such action could impact the bank’s ability to attract clients and investors in the future.
For the managers, they could face personal liability and potential legal consequences, including fines, suspension or loss of their license to operate in the financial industry. Overall, the impact of disciplinary action by FINMA could be significant for Credit Suisse and its stakeholders.