Credit Suisse scandals make Switzerland think unthinkable: punish bankers
The exasperation with Credit Suisse (CSGN.S) following a series of scandals is pushing Switzerland to rethink a system in which the big bankers have been largely untouchable.
Credit Suisse’s heavy losses over the collapse of the Archegos family office and the decimation of billions of client investments backed by insolvent UK financier Greensill have angered regulators and sparked a rare discussion among lawmakers about fines to bankers.
The debate, the largest public discussion of banking reform since the financial crash, centers on ending the current laissez-faire regime, where fines to bankers are not possible, to copy the greater rules of the Great Britain. Brittany.
“Bank managers do not take responsibility for their action because it is not necessary. There are no real penalties for mismanagement,” said Gerhard Andrey, a green member of the Swiss parliament. .
“The scandals that have hit Credit Suisse, from Mozambique to Greensill, are damaging to Switzerland’s reputation. We have proposed a reform … that would mean that if something is wrong, then the manager is a prisoner,” he said. he declared.
Andrey’s proposals, which follow the revolutionary British model of making the management of financial firms directly responsible for their actions, are expected to be discussed by Swiss lawmakers in the coming days.
The debate unfolded after Credit Suisse lost more than $ 5 billion to the collapse of the Archegos family office and faced a barrage of lawsuits of more than $ 10 billion in related client investments. at Greensill.
A spokesperson for the bank said its board of directors had launched inquiries that “would reflect on the wider consequences” of these events, adding that it had made managerial changes in the investment bank and companies. risk controls.
The series of scandals angered officials of the FINMA supervisor, who find it difficult to hold bankers to account because Swiss rules only allow directors to be sanctioned if they are directly involved in wrongdoing rather than for failures of general management.
A FINMA spokesperson told Reuters he welcomed a discussion on “optimizing” “personal liability issues”, adding that other financial centers “go much further than Switzerland” .
He said current Swiss rules only allow sanctions, such as banning bankers from working, only if there was a direct connection between the manager and wrongdoing, and it was not enough to show that this person was simply responsible.
Despite more than $ 15 billion in write-downs and penalties at Credit Suisse and multiple scandals, FINMA struggled to bring the bank under control, and dissident shareholders also did not oust its chairman, Urs Rohner, before he he is not retiring this year.
Besides Archegos and Greensill, Credit Suisse has seen other problems, including a spy scandal that forced the departure of its former CEO.
Its bankers have also faced litigation in Britain and the United States over loans to Mozambique that plunged it into a debt crisis.
Last year, U.S. prosecutors said they were investigating Credit Suisse’s role in the $ 2 billion corruption case, which stems from loans the bank helped organize to develop Mozambique’s coastal defenses. . The bank said it was cooperating with the investigation.
Commenting on its most recent setbacks, the bank said it had suspended some salaries of employees involved, including board members, so it could get the money back if needed.
Monika Roth, a Swiss lawyer and compliance expert, said it was prohibitive for bank shareholders to seek justice by suing directors for breaches in Swiss courts and that it should be possible for supervisors to recover the salary administrators.
However, any reform is likely to meet resistance. The Swiss Banking Association said the current supervision was “balanced” and rigorous and that any improvement should take into account the “peculiarities” of the Swiss bank.
Dominik Gross of the Swiss Alliance of Development Organizations predicted that Swiss lawmakers would be reluctant to change.
“It is understood that a strong financial center is an integral part of Switzerland – just like watches and chocolate. A large part of the population benefits from the money that comes in.”
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