2023-05-05 10:33:02
Mr. Brunetti, something is rotten in the state of Switzerland. 15 years ago, the state saved UBS from collapsing, now Credit Suisse, the second major Swiss bank, is being saved from collapse with state protection. What does that say?
This shows that we have a very deep problem with banks that are “too big to fail”, meaning that they are too big to be allowed to go bankrupt in a crisis. After the rescue of UBS in 2008, everyone agreed that something like this shouldn’t happen again: the state should never have to step in for a systemically important private bank again. Then we worked for ten years on rules that should make it possible to restructure a struggling big bank without state support or to wind it up in an orderly manner. In the case of Credit Suisse, regulation also helped to some extent: the bank had significantly more capital and liquidity and was therefore more crisis-resistant. But that wasn’t enough. Ultimately, the resolution variant and thus probably the most important element in the “too big to fail” concept was not triggered in the event of a crisis.
But the plans for the liquidation of the bank were ready and made. Why didn’t you take this path with Credit Suisse? Was there really no alternative to the state-supported rescue solution provided by UBS, as the Swiss government and the National Bank claim?
That is the crucial question. However, this can only be answered once the case has been analyzed in detail. Scenarios of a global financial crisis are easy to imagine, but I’m still not 100% convinced that it would have happened.
The Swiss financial market supervisory authority FINMA recently certified that Credit Suisse could have implemented the resolution plan that existed at the end of 2022. What do you think?
That’s an interesting finding. So FINMA was ready. It could have triggered the restructuring or liquidation of the bank. This would likely have triggered disruptions in certain markets. Certainly there were also warnings from foreign regulators, who referred to the already existing distortions in the American banking market. But citing the “uncertain environment” as the reason for the supposedly unavoidable state intervention is too cheap. Banks typically get into trouble when things are turbulent outside.
You yourself played a leading role in the development of the “too big to fail” regulation in Switzerland. Did you realize that this would not work in an emergency?
Regulation is split in two when the crisis occurs. On the one hand, it is about splitting off the parts that are systemically important for Switzerland. This is to ensure that domestic payment transactions and deposit and lending business are not affected in the event of bankruptcy. You could have done that. But there were obviously still question marks about the handling of transactions abroad, i.e. about “global resolvability”, although – as you mentioned – FINMA also judged the preparatory measures to be sufficient here for the first time in the latest report.
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