Thursday, 18 April 2024

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After Credit Suisse collapse Switzerland is now revamping its financial rulebook, placing UBS into heightened scrutiny

After Credit Suisse collapse Switzerland is now revamping its financial rulebook, placing UBS into heightened scrutiny

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Switzerland is accelerating efforts to reform its banking regulations a year after the collapse of Credit Suisse — and handing more power to those who will enforce them. 

The government is due to unveil long-awaited proposals for legislation in the coming days that are likely to touch on all of the main pillars of bank oversight, from capital and liquidity rules to controls on governance. UBS Group AG — the country’s sole remaining globally-systemic bank that’s now over twice the size of the domestic economy — is in for heightened scrutiny.

A key plank is strengthening Finma, the banking watchdog which was unable to prevent years of bad management at Credit Suisse threatening the nation’s historical reputation for financial stability. That task is aided this week by the arrival of Stefan Walter, a veteran European bank supervisor who’s spent a decade going toe-to-toe with the likes of Deutsche Bank AG, to serve as Finma’s new chief executive.

“I wouldn’t call the Swiss authorities toothless, but there are certainly some things which should be changed,” said Yvan Lengwiler, a professor at the University of Basel and the head of an expert panel created to make proposals for reform. “Finma definitely needs more resources to come on to an equal footing with the banks.”

Walter, 59, can be seen as the face of this revamp. The German national played a key role in building out the European Central Bank’s oversight arm when it started watching over lenders in 2014 as part of the response to the bloc’s sovereign debt crisis.

Walter is also a former secretary general of the Basel Committee on Banking Supervision and senior vice president at the Federal Reserve Bank of New York, two of the most significant bodies in the world of financial oversight. 

He helped build a system at the ECB which challenged banks on the risks they were taking. That approach continues to be seen, for instance in the recent crackdown on the leveraged lending businesses at Deutsche Bank, BNP Paribas SA and others.

The Swiss have long preferred a more consensual approach to financial oversight than is common in other jurisdictions. The lack of the ability to hand down fines has sometimes been justified on the basis that it would destroy the cooperative atmosphere. 

The philosophy of lean management is also reflected in the relatively small size of the regulator — just under 600 staff work at Finma to oversee a financial…

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