Fresh insights on the collapse of Credit Suisse and its takeover by UBS illuminate the regulatory, supervisory, and political culture that allowed it to happen. Last week, Marlene Amstad, chair of the board of directors of Swiss financial regulator FINMA, defended the regulator, the federal finance department, and the Swiss National Bank, on the grounds that allowing Credit Suisse to go bankrupt would have caused a financial crisis instead of deterring one.
That’s perfectly arguable - as far as it goes. But it leaves aside all the other unaddressed warning signs and opportunities to intervene that allowed the situation to get to this point in the first place.
On December 1, in a statement to the Financial Times widely reported by other news media, Credit Suisse Chair Axel Lehmann stated that “really massive outflows for two to three weeks” from client fund accounts had “completely flattened out” and “partially reversed”. But this February, Credit Suisse released annual results showing that outflows had in fact continued.
On March 10, FINMA announced that, after investigating Lehmann’s statements, it saw “no sufficient grounds to open supervisory proceedings”. So apparently Lehmann deliberately or inadvertently misled financial markets about Credit Suisse’s situation, and FINMA did nothing to sanction him for it.
Also in December, Credit Suisse was suing popular Swiss financial blog Inside Paradeplatz, insisting that 52 critical articles should be taken down and 200 reader comments deleted, and that its publisher, journalist Lukas Hässig, should pay 300,000 Swiss francs (US$327,000) in damages. The charges were not just civil, but for criminal defamation. Fortunately for Hässig, Credit Suisse collapsed before the case could be concluded.
Interviewed by Gotham City, another popular Swiss investigative blog targeting financial crime and malfeasance, Hässig characterised official responses to the Credit Suisse issue as symptomatic of “a pretty inept government”. The blog also referenced Swiss sentiment about Credit Suisse being the victim of “the English-speaking media ganging up on them”. That’s a pretty easy characterisation to adopt when Swiss banking confidentiality laws permit domestic reporters to be prosecuted for disclosing client information, regardless of public interest defences.
The first “Suisse Secrets” scandal erupted in March 2022 precisely because the anonymous leakers regarded Swiss banking secrecy laws as immoral. “That’s Switzerland,” Hässig said. “There is always a tendency to shield the powerful, until everything falls to pieces.”
So if Switzerland wants to continue as a haven for the wealthy, should it really persist in such policies? Draconian banking secrecy legislation did nothing to protect Credit Suisse from collapse, while protecting its culture of “stupidity and arrogance”, as Hässig dubbed it.
And it seems like regulators were ready to give Credit Suisse a free pass at points where stricter regulation could have allowed a far less catastrophic outcome.
Is that really the kind of culture that the international super-rich want to see? It’s more likely they'll continue to act exactly as they did with Credit Suisse, and vote with their feet.