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

Switzerland is speeding up its efforts to reform banking laws a year after the collapse of Credit Suisse – handing more powers to those who would set them up.

The government is set to unveil long-awaited proposals for legislation in the coming days that are expected to cover all major pillars of banking regulation, from financial and financial regulation to regulatory oversight. UBS Group AG – the only bank left in the world that is more than doubling the growth of the domestic economy – is taking a serious look at it.

The key plank is strengthening Finma, the banking regulator that has been unable to prevent years of bad leadership at Credit Suisse from threatening the country’s historic record of financial stability. The project is being helped this week by the arrival of Stefan Walter, a former European banker who has spent a decade going toe-to-toe with Deutsche Bank AG, to become Finma’s chief executive.

“I can’t say that the Swiss authorities have no teeth, but there are some things that need to be changed,” said Yvan Lengwiler, a professor at the University of Basel and head of the expert group created to create it. reform ideas. “Finma really needs more things to be able to connect with banks.”

Walter, 59, is seen as the face of this reform. Germany played a key role in setting up the European Central Bank when it began overseeing lenders in 2014 as part of a response to the institution’s massive debt crisis.

Walter is the former secretary general of the Basel Committee on Banking Supervision and senior vice president of the Federal Reserve Bank of New York, two of the world’s most important financial supervisory institutions.

He helped create a system at the ECB that held banks accountable for the risks they took. This method is still visible, for example, in in the near future Among the lending businesses that have been acquired are Deutsche Bank, BNP Paribas SA and others.

The Swiss have tended to favor a more cooperative approach to financial management than in other countries. Failure to pay fines has sometimes been justified on the basis that it would harm the contract.

The philosophy of lean management is also shown by the small size of the management – under 600 employees working at Finma to manage the financial sector that directly employs more than 230,000 people.

However, the rapid evolution of confidence in Credit Suisse after a series of mistakes and losses, as well as its sudden rescue by UBS, has undermined the previous agreement. Finma himself complained that although he recognized the rot at the heart of Credit Suisse, his requests for change were effectively ignored.

The government, including the finance ministry, the Swiss National Bank and Finma all agree on the need to increase regulatory powers. Even banks, including UBS, have expressed support for key aspects of the reform process.

Along with the ability to do better, an important part of this new approach is the so-called executive management – making people responsible for their decisions. Such a system, available in various forms in jurisdictions including the UK and Hong Kong, helps regulators identify who is at fault. Switzerland has to take its own path, according to Thomas Hirschi, Finma’s chief banking officer.

“Swiss law has always been, and probably will continue to be, based on principles rather than rules,” Hirschi said in an interview. However, for a successful general manager, specific requirements are required, he said. “If you only have principles, then we remain within the current system, where it is difficult to enforce the law.”

Policy and change in risk-taking culture among Swiss banks. The importance of such changes was confirmed at the end of last year when it became known that Julius Baer Group Ltd, a global wealth manager, acquired $ 700 million for one client – Austrian tycoon Rene Benko.

Internal control of the bank did not stop the increase in risk, and what was written when the joint venture Benko Signa went into bankruptcy wiped out half of the annual profit of the borrower. The chief of the chief came down; President, Romeo Lacher, he apologized.

The government’s supporters of the central regulator want to “stimulate the interest of bank managers in advance,” said Nina Reiser, associate professor of financial law at the University of St Gallen. “If there are documents that clearly explain my responsibilities, which are allowed by Finma or accounting firms, then I will carefully evaluate my decisions.”

There are other spoilers that some are recommending to convert – bonuses. Current regulations only allow Finma to make “guidelines” on how banks should be compensated. This is not strong enough, according to former Finma CEO Urban Angehrn.

Finma must be able to attract” bonus pool decisions of major banks, “Angehrn told Bloomberg Television last month. Marlene Amstad, the current chair of Finma, is also pushing for this to be legalized.

It is clear that UBS will be more transparent. The Zurich-based bank, which is the largest financial manager outside the US, is already facing significant capital and funding requirements due to its growth. Finma has encouraged the growth of its bank working group and is planning two depression on the balance sheet this year.

However, a debate is emerging about the adequacy of the existing data capital and liquidity requirements, based on the bank’s strategic importance. The SNB extended its statement last month, saying that a review of the ‘progressiveness’ of the main rules in terms of size is needed. It also said that an overhaul of the fund’s regulatory framework, which was shown to be inadequate during the Credit Suisse crisis, should be carried out.

Adding additional rules of money and leading money on top of the global trend, which was implemented after the financial crisis of 2008, leads to the prospect of a return that is called “Swiss Finish.” A further approach from domestic regulators has angered bank regulators in the past, and could lead to a major pushback if it becomes part of the government’s strategy.

The dramatic rise in interest rates last year may have helped mask any Swiss financial crisis. Despite the fact that one of the country’s institutions was on the verge of bankruptcy, the banks kept hiding the money they got from the loans.

“I don’t see much reason to change the management system in Switzerland,” said Nicolas Veron, director of the Peterson Institute for International Economics in Washington and Bruegel in Brussels. “What happened was not really a failure like ‘the world will never be the same again.’ It’s like ‘lessons learned, let’s do it better next time.'”



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