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Committee publishes 569-page report on Credit Suisse

meltdown

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Says 'years of mismanagement' caused crisis

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Criticises lack of transparency at regulators

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Report will be used to inform banking sector reforms

By Dave Graham and Ariane Luthi

BERN, Dec 20 (Reuters) - Swiss lawmakers called for

stricter oversight of the financial sector after investigating

the collapse of Credit Suisse, casting an unflattering light on

authorities while pinning the blame on the bank's implosion

primarily on its managers.

In a long-awaited 569-page report published on Friday,

lawmakers exposed Swiss bureaucracy that is unaccustomed to

scrutiny, rebuking regulators for being secretive and

mistrustful, and for responding at times haphazardly to the

crisis that felled the bank in March 2023.

Arch rival UBS stepped in to buy Credit Suisse for

a fraction of its value in a government-orchestrated rescue.

In June 2023, parliament took the unusual step of forming a

committee to probe the official response to the Credit Suisse

meltdown. Interviews with those involved were held privately.

The government has said it will use the findings to inform

its plans for reform of the banking sector.

"The (committee) considers Credit Suisse's years of

mismanagement to be the cause of the crisis," say the opening

lines of a statement accompanying its report, translated from

German.

The committee, known as PUK, chronicled in detail the

chaotic final days of the bank, and criticized a lack of

transparency during months of crisis meetings between finance

ministry officials, the central bank, and the market regulator

FINMA, urging them to keep written records in future.

"However, the PUK does not see any causal misconduct on the

part of the authorities for the Credit Suisse crisis and finds

that they prevented a global financial crisis," it wrote.

The unravelling of 167-year-old Credit Suisse, a pillar of

the financial establishment and the country's second-biggest

lender, left Switzerland with just one major international bank,

which now holds a balance sheet bigger than the entire economy.

The government in April sketched out 'too-big-to-fail' plans

to ensure UBS does not go the same way as Credit Suisse,

centring chiefly on making the bank hold more capital. But it

vowed not to give more specifics until after the PUK report.

The committee's conclusions did not offer prescriptive

advice on how the banking sector should be reformed, but the

broad sweep of the 30 recommendations and requests directed at

the government cleaved closely to those April proposals.

It pressed the government to strengthen FINMA and ensure

"appropriate consideration" be given to the foreign units of

systemically relevant banks such as UBS, which authorities have

said could need bigger capital buffers to weather crises.

The PUK report also argued that financial incentives in the

sector should not be skewed after noting that bonuses paid out

to Credit Suisse's management between 2010 and 2022 exceeded the

bank's 34 billion Swiss francs ($37.9 billion) in losses during

that period.

The committee criticized FINMA for granting Credit Suisse

relief in how much capital the lender needed to hold in the

years before its undoing and urged the government to limit such

concessions in future.

UBS has argued that systemically important banks already

have enough capital and that excessive demands could hurt

business and undermine Switzerland's attractiveness to

investors.

NON-MEETINGS

Officials were discussing the potential demise of Credit

Suisse for months, but the report found that many of their

discussions were ad hoc and lacking in transparency.

In particular, the inquiry raised questions about how former

Finance Minister Ueli Maurer shared information about the bank

with his successor Karin Keller-Sutter, who took office in 2023.

Maurer, who with former Swiss National Bank Chairman Thomas

Jordan initiated informal "non-meetings" that created a

"parallel format" to crisis-management authorities, told

lawmakers he was concerned about damaging leaks, the PUK said.

Looking to reassure markets, Maurer publicly backed Credit

Suisse in December 2022, telling Swiss television: "You just

have to leave them alone for a year or two."

But as he prepared to hand over to Keller-Sutter, he did not

do enough to warn her, telling her around Christmas time that

the bank was in a stable condition, the report said.

"The PUK reaches the conclusion that the departmental

handover regarding the Credit Suisse dossier did not proceed

ideally. A dossier handover did not actually take place."

Though the report said Keller-Sutter injected more urgency

into proceedings, she was criticised for failing to keep the

cabinet apprised fast enough about findings on how the crisis

might play out.

Such was the hermetic manner in which top officials handled

the crisis, the report said, that the full cabinet was only

informed about events in late 2022 heralding Credit Suisse's

ultimate demise during its final days in March 2023.

($1 = 0.8980 Swiss francs)