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Credit Suisse collapse probe slams banking regulator


By AFP
December 20, 2024

Credit Suisse was hit by a string of scandals before being taken over by UBS

 - Copyright AFP TREVOR COLLENS

Nathalie OLOF-ORS

Switzerland’s financial regulator was ineffective in tackling the scandals at Credit Suisse, where executive mismanagement scuppered the bank and nearly triggered a global financial crisis, a Swiss inquiry concluded Friday.

However, after an 18-month investigation raking over the dramatic collapse of one of the world’s biggest banks, the rarely-used parliamentary commission of inquiry found no evidence that the implosion of Credit Suisse was caused by misconduct on the part of the authorities.

“Credit Suisse’s long-term mismanagement is the cause of the crisis,” the inquiry said.

“The board of directors and management of Credit Suisse in recent years are responsible for the loss of confidence in the bank.”

Credit Suisse was among 30 international banks deemed too big to fail due to their importance in the global banking architecture.

But the collapse of three US regional lenders in March 2023 left Credit Suisse looking like the weakest link in the chain and its share price plunged more than 30 percent on March 15 last year.

The Swiss government, the central bank and the Financial Market Supervisory Authority (FINMA) then strongarmed the country’s biggest bank UBS into a $3.25-billion takeover announced on March 19 before the markets reopened the following day.

The government feared Credit Suisse would have quickly defaulted and triggered a global banking crisis that would also have shredded Switzerland’s valuable reputation for sound banking.

– Global crisis avoided –

The authorities’ actions “avoided a global financial crisis”, according to the more than 500-page report.

The commission levelled numerous criticisms at the financial market regulators, saying it “deplores the partial ineffectiveness of FINMA’s supervisory activity”.

It said it did not understand why, back in 2017, FINMA granted “vast capital relief” without which Credit Suisse would have “had difficulty meeting regulatory requirements” four years later, and “would have been absolutely incapable of doing so from 2022”.

FINMA had issued several warnings and launched numerous procedures against the bank, the commission said, but found Credit Suisse’s managers had been “reticent” when the regulator intervened.

The inquiry regretted that at the time, FINMA did not withdraw the certificate that banks need to operate in Switzerland.

However, the inquiry “has not identified any misconduct by the authorities that caused the Credit Suisse crisis”.

– Merger raised concerns –

The merger raised serious concerns in Switzerland around jobs, competition and the size of the resulting bank relative to the Swiss economy.

The inquiry was set up in June 2023, tasked with tasked with investigating the role of Swiss authorities in the emergency merger of Switzerland’s second-biggest bank into its larger domestic rival UBS.

It was composed of 14 lawmakers — seven from each house of parliament — with all the major parties represented.

It was only the fifth parliamentary committee inquiry ever held in Switzerland and the first since 1995.

The commission looked at events from 2015 onwards to identify the factors that led to the bank’s downfall, and examined more than 30,000 pages.

– Recommendations on regulations –

The inquiry criticised the rules applicable to banks deemed too big to fail, finding that the government and parliament had placed “too much importance” on the demands of the big banks.

The commission made 20 recommendations to the government.

It said the regulations on “too big to fail” banks should be placed within an international framework, to clarify the rules for cooperation between the authorities responsible for financial stability in Switzerland.

In April, UBS chairman Colm Kelleher said he was concerned about a looming tightening of the rules, warning that the bank risked being penalised compared to its international competitors.

He said the fall of Credit Suisse was down to a crisis of confidence, but said trust in a bank was not something that could be regulated.

The Swiss Bank Employees Association has called for greater resources to supervise banks, saying the collapse of Credit Suisse was down to a few unscrupulous senior managers, with junior staff paying the price.

Ex-IMF chief Rato gets four-year jail term in Spain for tax crimes


ByAFP


PublishedDecember 20, 2024


Rato headed the IMF from 2004 to 2007 - Copyright AFP OSCAR DEL POZO
Imran Marashli

A Madrid court sentenced ex-IMF chief and Spanish economy minister Rodrigo Rato to more than four years in prison for tax crimes, money laundering and corruption, it said Friday.

The sentence comes after the disgraced former heavyweight of Spain’s conservative Popular Party was jailed for four and a half years in 2018 for misusing funds while working at lender Bankia.

Prosecutors had alleged that Rato defrauded the Spanish tax office and lined his own pockets to the tune of 8.5 million euros between 2005 and 2015.

Judges found Rato guilty of “three offences against the Treasury, one offence of money laundering and one offence of corruption between individuals”, the court said in a statement.

Rato was sentenced to four years, nine months and one day in jail and fined more than two million euros ($2.1 million), which he can appeal at the Supreme Court.

The court added that the “undue delays” in the proceedings, which lasted more than nine years, reduced the sentence.

Rato refused to comment on the decision, wishing journalists gathered outside the court “a very merry Christmas”, and said he would respond in a written message to court.

Rato spent eight years variously serving as economy minister and a deputy prime minister in the conservative government of Jose Maria Aznar before going on to lead the International Monetary Fund from 2004 to 2007.

– Economic crisis –

He later headed Spanish lender Bankia, where he misused company credit cards for personal expenses between 2010 and 2012.

That earned him the 2018 jail sentence before he was moved to a semi-open prison regime in late 2020.

That decision came just after he was acquitted in another case of fraud and falsifying the books during the 2011 flotation of Bankia.

The Bankia scandal came to light at the height of a severe economic crisis that left many people struggling financially.

It sparked outrage in Spain, which worsened when the government then spent 22 billion euros on a bailout for the failing lender that quickly won notoriety as a symbol of financial excess.

A second defendant, Domingo Plazas, was sentenced to 18 months in prison for money laundering and collaborating in two of Rato’s tax offences.

Another defendant, Alberto Portuondo, got three months and one day for colluding with Rato in a corruption scheme whereby they received kickbacks in return for securing Bankia contracts.

The court cleared the 13 other defendants in the trial.