Swiss lawmakers tell Credit Suisse to clean up its act, seek to ringfence crisis
17/03/2023 16:36
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Politicians vow to hold CS accountable for crisis
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Broad political backing for central bank's lifeline
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Switzerland's reputation tarnished but can withstand CS
woes
By Alexandra Hudson and Tom Sims
ZURICH, March 17 (Reuters) - Swiss lawmakers on Friday
vowed to bring those responsible for Credit Suisse's problems to
account and urged it to clean up its act after years of
scandals, as they sought to contain the crisis and limit any
reputational damage to the country.
Credit Suisse CSGN.S , Switzerland's second largest lender,
clinched an emergency central bank loan early on Thursday of up
to $54 billion to shore up its liquidity after its shares fell
24% on Wednesday, when its largest investor said it could not
offer any more financial assistance.
The stock jumped 20% on Thursday, but fell 10% on Friday in
volatile trade.
The Swiss cabinet held an emergency meeting about the
central bank's move on Thursday but gave no public statement
after, with most politicians, including Finance Minister Karin
Keller-Sutter, tight-lipped.
Among those who did comment, politicians from across Swiss
ruling parties backed the Swiss National Bank's (SNB) move to
provide liquidity, but put Credit Suisse managers under the
spotlight for the scandals and losses that led to a crisis of
confidence.
Switzerland, while priding itself on its financial know-how,
has few mechanisms for holding top bankers individually
responsible for mismanagement, unlike some other financial
centres such as Britain where senior managers can face criminal
sanctions.
Switzerland's Social Democrats (SP), the second largest
party in the lower house of the parliament, called for a wide
search into who was responsible for a crisis "everyone should
have seen coming".
"Our system hasn't managed to hold those responsible who
should be held responsible," SP co-president Cedric Wermuth told
reporters on Thursday. "Who knew what, when .... Who knew when
we had a systemic problem .... Who should have sounded the alarm
when it was necessary?" he asked.
Greens lawmaker Gerhard Andrey said managers should take
responsibility and Switzerland should look at its regulations,
with the Credit Suisse debacle putting the country "in a very
difficult situation".
"It is about the responsibility of top level management and
about culture. We don't need more boxes to check. We need
another culture," he told Reuters.
Andrey said a year and a half ago he had convinced
parliament and the government to rethink regulation and make top
executives more accountable, with results due later this year.
"The industry has a trust issue, not because the sector as a
whole isn't trustworthy, but a few organizations put it in a
very bad position," he said
"This mismanagement led to a situation where we are now."
So far, there hasn't been large-scale public outcry.
"It was foreseeable that the SNB would provide liquidity.
That Credit Suisse has problems has been known for a long time,"
said Martin Staub speaking in central Zurich.
Others expressed their faith in the Swiss banking system.
"We are clever with banks," said Diva Bosch, out shopping in
central Zurich.
One passerby who declined to give his name said, however:
"After all the management mistakes and the huge bonuses, let
them collapse. It's over."
SWITZERLAND BEYOND BANKS
Fifteen years after the bailout of rival UBS UBSG.S and
subsequent clampdown on baking secrecy, the turmoil at Credit
Suisse has put another dent in the Swiss armour of financial
stability.
But Switzerland is still the world's largest wealth
management centre, according to 2021 study by Deloitte, in terms
of competitiveness, size and performance. The financial sector
makes up about 9% of Swiss gross domestic product, according to
Finance Swiss, and employs 5.5% of the workforce.
The aggregate balance sheet of all banks in Switzerland
stood at 5.2 times the size of the country's economy in 2021.
While its big banks are famous, more than 99% of registered
businesses in Switzerland are small enterprises with less than
250 staff, and the country has a weighty pharma sector as well
as the world's largest food company Nestle.
"It will be harsh for some if Credit Suisse disappears but
Switzerland will be just fine," said Stefan Legge, head of tax
and trade policy at the University of St. Gallen's IFF Institute
for Financial Studies.
"The Credit Suisse crisis is negative for Switzerland, but
not enough to damage the reputation of Switzerland on its own.
For a complete disaster there would have to be a large group of
people losing a lot of money and lots of jobs lost. But the only
people who have lost money so far are the shareholders, and they
chose to buy stock," he told Reuters.
He believes the damage to the bank's reputation is so
severe, however, it will have to change.
"I expect someone to come and take the valuable assets and
the rest will die .... They have announced a turnaround so many
times, they all failed."
(Additional reporting by John Revill, Reuters television,
Writing by Alexandra Hudson, Editing by Mark Potter)
((alexandra.hudson@thomsonreuters.com;))