Just over a year after the bailout of Credit Suisse, the Swiss government has announced new measures designed to make sure a similar crisis does not happen again. The plan will involve strengthening regulations, safety nets and restrictions on bankers' bonuses, in the event another major bank in Switzerland finds itself in turmoil.

Swiss banking sector to be reformed following Credit Suisse crisis

Speaking at a press conference on April 10, Finance Minister Karin Keller-Sutter said that “what happened at Credit Suisse must not be repeated.” The bank had been beset by scandal after scandal in the lead-up to the crisis, which culminated on March 13, 2023: when the firm announced a huge loss in revenue, Saudi Arabia’s national bank stated they would not invest any more money in CS and the company's stock price plummeted by 30 percent. 

The bank finally agreed to a 50 billion franc bailout from the Swiss National Bank (SNB) on March 16, after questions were raised about the firm's ability to cover its losses. The denouement came on March 19, when following negotiations with the government, UBS moved in to acquire Credit Suisse for 3 billion Swiss francs. The two officially merged on June 12, 2023.

New banking rules in Switzerland explained

At the press conference, Keller-Sutter argued that the government was only able to solve the crisis quickly “because a bank, UBS, was prepared to take over Credit Suisse,” noting that if UBS itself is embroiled in the same crisis in the future, there wouldn’t be such an easy fix. Therefore, the minister proposed 22 new measures, which she argued would help protect taxpayers and make sure a bank crisis would not have the potential to sink the Swiss economy.

1. New plans to combat future banking crises

First, the government will create a new legal process so that “systemically important banks” - UBS, the SNB, Postfinance and Zürcher Kantonalbank, for example - will be “able to exit the market in an orderly manner.” This will include creating a new crisis plan for the federal government and SNB to follow in the event of a crisis, which will include different plans tailored to different situations.

2. Crisis fund at the Swiss National Bank

Since January 2024, Swiss banks have been required to hold more money in reserve to cover surprise losses. As part of the new plan, the federal government will look into whether the SNB should maintain a large bailout fund, to be used if a crisis happens again.

3. Increased regulation on bank bonuses and accountability

Finally, Keller-Sutter announced that federal finance authorities will be given more power to make sure banks have “good corporate governance and more responsible risk management.” Banks would be required to clearly state which individuals are responsible for certain tasks within the company so that it will be easier to hold individuals accountable for mismanagement. 

As part of the law, the government stated that bankers' bonuses “should be geared towards long-term economic success and should be cancelled in the event of mismanagement - even retroactively if they have already been paid out.” This is likely a response to the news that UBS boss Sergio Emotti received bonuses worth 14 million francs in 2023. However, the government noted that the new rules will be enforced by fines and not caps on bonuses or salaries.

New banking reforms reflect a balance of interests, says minister

Speaking at the conference, Keller-Sutter said that her plan struck the right balance: “We want a leading financial centre, but on the other hand, measures must be taken to ensure that it is as safe as possible - so that we do not run the risk that taxpayers will ultimately have to bear the risk of entrepreneurial failure.”

Regarding Emotti’s bonus, the minister said that the sum reflected “a disconnect between the economy and the population…It concerns me – not only at UBS but also at other companies. Here again, remuneration is being paid that exceeds the imagination of every normal citizen.”

Federal Council banking plan met with mixed response

Needless to say, the new banking rules have been met with a mixed response within parliament. Green Liberal Party State Councillor Tiana Moser praised the rules, telling 20 Minuten that “stricter rules for managers are essential. Millions in salaries without personal responsibility for failure are indecent.”

Keller-Sutter’s party, FDP. The Liberals, were more cautious, writing in a statement that they would examine the proposals in detail before supporting them. While they were happy that action was being taken against mismanagement, their "experience" shows “that after crises there is a tendency towards over-regulation.”

SP argues plan does not go far enough

Others were more stringent in their opposition, with Social Democratic Party co-president Cédric Wermuth telling reporters that “the measures proposed by the Federal Council are not enough to effectively regulate the banking sector.” He argued that the system fails in its reform as it would still require the government and taxpayers to bail out the banks in times of crisis.

“It seems as if the new megabank UBS has a lobbyist in the Federal Council in Karin Keller-Sutter,” Wermuth concluded, confirming that his party would be opposing the majority of the plan in parliament. For their part, a UBS spokesperson told the AWP news agency that it did not wish to comment on the plans.

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