Swiss inquiry castigates failings of Credit Suisse oversight, but pins most blame on bosses

By Dave Graham and Ariane Luthi

BERN (Reuters) - Swiss lawmakers called for stricter oversight of the financial sector after investigating the collapse of Credit Suisse, casting an unflattering light on authorities while pinning the blame on the bank's implosion primarily on its managers.

In a long-awaited 569-page report published on Friday, lawmakers exposed Swiss bureaucracy that is unaccustomed to scrutiny, rebuking regulators for being secretive and mistrustful, and for responding at times haphazardly to the crisis that felled the bank in March 2023.

Arch rival UBS stepped in to buy Credit Suisse for a fraction of its value in a government-orchestrated rescue.

In June 2023, parliament took the unusual step of forming a committee to probe the official response to the Credit Suisse meltdown. Interviews with those involved were held privately.

The government has said it will use the findings to inform its plans for reform of the banking sector.

"The (committee) considers Credit Suisse's years of mismanagement to be the cause of the crisis," say the opening lines of a statement accompanying its report, translated from German.

The committee, known as PUK, chronicled in detail the chaotic final days of the bank, and criticized a lack of transparency during months of crisis meetings between finance ministry officials, the central bank, and the market regulator FINMA, urging them to keep written records in future.

"However, the PUK does not see any causal misconduct on the part of the authorities for the Credit Suisse crisis and finds that they prevented a global financial crisis," it wrote.

The unravelling of 167-year-old Credit Suisse, a pillar of the financial establishment and the country's second-biggest lender, left Switzerland with just one major international bank, which now holds a balance sheet bigger than the entire economy.

The government in April sketched out 'too-big-to-fail' plans to ensure UBS does not go the same way as Credit Suisse, centring chiefly on making the bank hold more capital. But it vowed not to give more specifics until after the PUK report.

The committee's conclusions did not offer prescriptive advice on how the banking sector should be reformed, but the broad sweep of the 30 recommendations and requests directed at the government cleaved closely to those April proposals.

It pressed the government to strengthen FINMA and ensure "appropriate consideration" be given to the foreign units of systemically relevant banks such as UBS, which authorities have said could need bigger capital buffers to weather crises.

The PUK report also argued that financial incentives in the sector should not be skewed after noting that bonuses paid out to Credit Suisse's management between 2010 and 2022 exceeded the bank's 34 billion Swiss francs ($37.9 billion) in losses during that period.

The committee criticized FINMA for granting Credit Suisse relief in how much capital the lender needed to hold in the years before its undoing and urged the government to limit such concessions in future.

UBS has argued that systemically important banks already have enough capital and that excessive demands could hurt business and undermine Switzerland's attractiveness to investors.

NON-MEETINGS

Officials were discussing the potential demise of Credit Suisse for months, but the report found that many of their discussions were ad hoc and lacking in transparency.

In particular, the inquiry raised questions about how former Finance Minister Ueli Maurer shared information about the bank with his successor Karin Keller-Sutter, who took office in 2023.

Maurer, who with former Swiss National Bank Chairman Thomas Jordan initiated informal "non-meetings" that created a "parallel format" to crisis-management authorities, told lawmakers he was concerned about damaging leaks, the PUK said.

Looking to reassure markets, Maurer publicly backed Credit Suisse in December 2022, telling Swiss television: "You just have to leave them alone for a year or two."

But as he prepared to hand over to Keller-Sutter, he did not do enough to warn her, telling her around Christmas time that the bank was in a stable condition, the report said.

"The PUK reaches the conclusion that the departmental handover regarding the Credit Suisse dossier did not proceed ideally. A dossier handover did not actually take place."

Though the report said Keller-Sutter injected more urgency into proceedings, she was criticised for failing to keep the cabinet apprised fast enough about findings on how the crisis might play out.

Such was the hermetic manner in which top officials handled the crisis, the report said, that the full cabinet was only informed about events in late 2022 heralding Credit Suisse's ultimate demise during its final days in March 2023.

($1 = 0.8980 Swiss francs)

(Reporting by Dave Graham and Ariane Luthi; Editing by Rosalba O'Brien)