Swiss National Bank calls for new measures after Credit Suisse crash

The Swiss National Bank (SNB) on Thursday said it was crucial to draw lessons from the Credit Suisse crisis that led to the bank’s downfall and forced rescue by rival UBS and consider measures that would prevent such events in the future.

“These measures need to strengthen banks’ resilience in order to prevent a loss of confidence wherever possible, and ensure a broad range of effective options to stabilise, recover or wind down a systemically important bank in the event of a crisis,” the central bank said in its 2023 financial stability report.

It also called for banks to be required in the future to prepare a minimum amount of assets that could be pledged for central banks.

Switzerland’s largest bank recently grew even bigger, following its rescue of embattled Credit Suisse in a takeover engineered by Swiss authorities in March and formalised by UBS on June 12.

Politicians and economists have raised concerns about whether Switzerland can effectively oversee a bank that now has a balance sheet of $1.6 trillion and 120 000 employees worldwide, and risks associated with that.

The SNB said it was not yet able to judge how resilient the newly merged bank would be.

“The currently available data are not sufficient for a comprehensive assessment of the combined bank’s resilience in such a forward-looking analysis,” the report said.

The central bank said there were, however, three key observations to come from the crisis, including that compliance with capital requirements is necessary but not sufficient to ensure confidence in a bank.

“Second, AT1 capital instruments absorbed losses only as the point of non-viability was imminent and state intervention became necessary,” the report said.

The SNB also said that the scale and pace of deposit outflows at Credit Suisse that resulted from the loss of confidence were unprecedented and more severe than assumed under the liquidity regulations.

In a statement published the day the biggest banking deal since the 2008 financial crisis officially closed, Swiss regulator, FINMA, said one of the most pressing goals for the new merged bank was to quickly reduce the risk of the former Credit Suisse investment bank, but was confident this could be achieved.