The global regulatory regime for “too big to fail” banks set up after the 2008 crisis is not working, according to Switzerland’s finance minister.
In an interview with the Swiss newspaper NZZ on Saturday, Karin Keller-Sutter – who was at the center of the Swiss authorities to save Credit Suisse last weekend – said after the emergency protocol that is at the center of the regulatory architecture for big banks “it will lead to an international financial crisis”.
Capital buffers and extra regulatory rules at risk have been useful to navigate tough times, Keller-Sutter said, but in a real crisis, plans to facilitate an orderly rescue or wind-down of big banks are not enough.
“Personally, I have come to the conclusion . . . that a globally systemically important bank cannot simply be disposed of under a ‘too big to fail’ plan,” he said. “Legally, this can be done. But in practice, the economic damage will be enormous.
Last weekend was “obviously not the time to experiment”, he added in his first interview since the crisis erupted. “Credit Suisse’s crash will drag other banks into the abyss.”
The finance minister, who took office at the end of December, said concerns about Credit Suisse’s liquidity were the first questions he asked civil servants when he took office.
He said that he asked three months ago: “When will it reach the point where the authorities have to intervene; where will Finma come to the conclusion that CS can no longer survive?
Keller-Sutter sat at the center of the emergency negotiations, representing Switzerland’s governing Federal Council and coordinating with the Swiss National Bank and market regulator Finma.
The eventual rescue plan, in which the bank was taken over by larger rival UBS, was widely criticized, many focusing on Finma’s decision to write off SFr16bn of convertible bonds while preserving some value for Credit Suisse shareholders.
Bondholders have vowed to take the Swiss authorities to court over the lengthy and high-profile litigation.
Keller-Sutter did not answer questions on the decision to eliminate the subordinated credit holder Credit Suisse, but told NZZ that the takeover by UBS is the only viable option, and the government is doing what it can to facilitate the deal while trying to reduce any burden. about Swiss taxpayers.
Domestically, the merger of the country’s two biggest banks – for which the government has written a SFr9bn guarantee and authorized a SFr100bn liquidity line from the SNB – has proved unpopular.
A poll released on Friday showed that three-quarters of Swiss people surveyed supported legislation to break up the new entity, with a majority concerned that the government had overstepped its authority.