Scandals could bring Swiss bank bosses more control

The billion-dollar failures of the major bank Credit Suisse are fueling demands in Switzerland to hold the top managers, who have so far mostly got away with it, more accountable. Members of parliament want to discuss a corresponding tightening in the coming days.

The financial market supervisory authority (Finma) will meet you with open ears. “We welcome it when opportunities for optimization in the area of ​​corporate governance and questions relating to personal responsibility are analyzed and discussed by managers,” said a spokesman for the agency.

The debate flared up after Credit Suisse lost five billion Swiss francs to the collapse of the Archegos hedge fund. In addition, there are billions in the fire for the customers of the fund, which is operated together with the now insolvent Greensill, and the bank threatens a wave of lawsuits. But that’s not all. Finma has been investigating a shadowing case for a long time. And loans to Mozambique, which plunged the African country into a debt crisis, broke the bank’s proceedings in the UK and the US. Value adjustments and fines have already cost the Zurich institute over 15 billion francs in recent years.

The series of scandals has angered Finma representatives, according to people familiar with the situation. But the authority is having a hard time taking action against bank spikes. According to the existing rules, managers may only be punished with a work ban if they are directly involved in misconduct, but general management errors are not enough. Other financial centers such as Great Britain, Australia, Hong Kong or Singapore go much further here than Switzerland. The British model makes the top management of financial companies directly accountable for their actions.

A member of parliament now wants to bring precisely this proposal to the table. “Bank directors take no responsibility for their actions because there is no need to do so,” says Gerhard Andrey from the Greens. “There are no real sanctions for mismanagement.” The scandals at Credit Suisse – from Mozambique to Greensill – damaged Switzerland’s reputation. “We proposed a reform,” says the politician. “That would mean: if something goes wrong, then the manager is on the hook.”

A possible reform, however, is likely to meet with concentrated resistance. The Swiss Bankers Association said current supervision is balanced and strict and that any adjustments should take into account the specifics of Swiss banking. A Credit Suisse spokesman pointed out that the bank had initiated internal investigations into the latest incidents and had already drawn the first conclusions with changes in management. In addition, the institute suspended salaries for the employees involved, including members of the management.

The lawyer and compliance expert Monika Roth calls for the supervisory authority to be able to put its hand on top management salaries in the future. But this expansion of competencies would require a rethink in politics. Dominik Gross from the development aid organization Alliance Sud assumes that many MPs will resist such a change. A large part of the population benefits from the industry. “In Switzerland it goes without saying that a strong financial center belongs to the country like watches or chocolate.”

–