2023-10-10 13:39:50
A global banking watchdog downplayed the Credit Suisse bailout, saying there was no need to revise international rules written after the global financial crash 15 years ago to avoid such a debacle.
The Financial Stability Board, an influential group of central bankers, regulators and officials from the world’s major economic powers, released its “lessons learned” report on Tuesday, concluding that the framework was a success.
In particular, he examined why Swiss authorities chose to support a takeover by major rival bank UBS instead of liquidating the bank under a “resolution” mechanism designed after the global financial crash of 2008.
Officials concluded that “resolution” rules to close a failing bank without panicking markets could have worked for Credit Suisse, even though public funds would likely have been needed.
“This review concludes that recent events demonstrate the robustness of the international resolution framework to the extent that it provided the Swiss authorities with an enforceable alternative to the solution they deemed preferable,” the FSB said.
Only improvements in the way the rules are applied might be needed, rather than changes in their substance, he added.
The report faced an avalanche of criticism earlier this year, when UBS Group became Switzerland’s largest bank after the government hastily arranged and partly financed its takeover of struggling Credit Suisse.
The FSB report sheds light on the events that led to the collapse of the Swiss bank.
In mid-2022, the Swiss regulator FINMA began crisis discussions with its international counterparts. The Swiss considered a “resolution” to liquidate the bank, a nationalization or a merger.
U.S. officials have warned against the resolution, which would have affected bonds held by U.S. investors, pointing to legal hurdles.
The bank’s new management faced “extreme episodes of liquidity stress” during the first half of October 2022, when panicked customers withdrew between 12 and 15 billion Swiss francs (16.5 billion dollars) per day.
The group recovered before the ruins of the US banking market caused a drop in the share price and further withdrawals the following March, pushing it into the arms of UBS.
The report does not criticize Switzerland, although Bank of England Governor Andrew Bailey said the Swiss had not followed the “manual”, which created “ambiguity” in the markets over the credibility of the resolution of the big banks.
The FSB said Switzerland’s action preserved financial stability, although it raised questions about why the resolution was not chosen. ($1 = 0.9076 Swiss franc) (Reporting by Huw Jones; Editing by John O’Donnell, Paul Simao and Christina Fincher)
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