Sergio Ermotti, the Chief Executive Officer of UBS, has called for increased powers for Switzerland's financial regulator and sanctions for negligent bankers in the aftermath of the collapse of Credit Suisse. UBS played a crucial role in rescuing its former rival in March, marking one of the most significant bank takeovers since the 2008 financial crisis. Ermotti's rare show of support for stricter regulations reflects the need for greater personal accountability in Switzerland's banking sector.
During a speech at Zurich University, Ermotti emphasized the importance of making it easier for banks or regulators to pursue individuals who demonstrate negligence in their duties. While he suggested that Switzerland's regulatory framework does not require fundamental changes, he endorsed targeted alterations to address the root causes of Credit Suisse's collapse.
One key aspect of the proposed reforms is the strengthening of tools for early intervention by supervisors, based on an objective set of indicators and supported by a robust legal basis. Ermotti's endorsement aligns with a package of reforms presented by a government-appointed panel of financial experts in September, tasked with analyzing the near collapse of Credit Suisse.
The panel's findings highlighted the weakness of Switzerland's market regulator, Finma, in handling banking crises effectively. It pointed out that Finma lacked the necessary authority compared to its international counterparts and faced challenges in enforcing its will on the country's banking sector.
Credit Suisse's troubles came to a head in March, when a share price collapse and a significant outflow of client assets led Swiss authorities to seek UBS's intervention. The 167-year-old institution, which played a vital role in financing Switzerland's industrial revolution, faced a parliamentary inquiry into its collapse.
Ermotti characterized Credit Suisse's downfall as a "slow, painful decline" with a "dramatic finish" that was embarrassing for the Swiss financial center and the country's overall image. He criticized the governance failures at Credit Suisse, citing repeated risk management and operational failures that undermined the credibility of its leadership and board.
The UBS CEO's call for enhanced regulatory powers and sanctions reflects a broader recognition within the industry of the need for stronger mechanisms to prevent and address financial crises. As the Swiss government considers reforms to its banking rules, the focus on accountability and regulatory effectiveness is essential for maintaining stability and confidence in the financial sector.
