University:
University College London
Course:
LAWS0023 | Commercial Law
Academic year:

2024
Views:

266

Pages:

5
Author:

N. Azzahra

A First Analysis Rescue Of Credit Suisse By Swiss Authorities Date: 22 May 2023 Presented by: Dr. Reto Schiltknecht, Attorney-at-Law Senior Counsel at Consulting Firm Geissbühler Weber & Partner, Zurich ex FINMA Responsible for Too-Big-To-Fail" (TBTF) Some Thoughts As Introduction - Was the Credit Suisse rescue a bail-out? - Mission completed? Yes. Financial markets calmed down, bank-run stopped, a global financial crisis avoided. But: What is the price? - «Too-big-to-fail» after the global financial crises and the UBS rescue 2008 suddenly in the spotlight again. - 15 years of heavy work on TBTF in vain? Frustration that TBTF regulations allegedly did not work. But: Did they really didn't work? - Discussion on possible recipes after the first shock. 19th Of March 2023 - What Happened? Explanation:  Liq-loan incl bankruptcy privilege = ELA+ Liq-loan with back-up guarantee and bankruptcy  privilege = Public Liquidity Backstop (PLB)  FINMA = Swiss Financial Market Supervisory Authority Credit Suisse – An Incomplete Chronology <>> Problems Mismanagement, Improper business model Uncertainties re key personnel Start of crisis? Stress buffers used (CFP) Recovery Plan activated Before 2020 - 2013/14  - 15.07.2015  - US tax dispute Thiam replaces Dougian as CEO 17.09.2018: FINM  FINMA states deficiencies in AML defense  20.12.2019: FINMA  External investigator in the spy affair 2020 - 07.02.2020  - 02.09.2020: FINMA  2021 Resignation of Tidjane Thiam; Thomas Gottstein new CEO Opening of an Enforcement procedure re the spy2021 affair - 19.01.2021: CS, FINMA  - 30.04.2021  - Arch egos report 13.08.2021: CS  - FINMA Opening of procedures re Arch egos/Green sill 29.07.2021: CS  - Mozambique & spy affair Axe P. Lehmann, nomination to the BOD 04.11.2021: CS  Announcement Group strategy 2022 - 17.01.2022: CS  - 28.02.2022: CS, FINMA  - Formal decision by the courts of Bermuda 27.04.2022: CS  - Announcement Bermuda court order of USD 500 million 29.03.2022  - Completion Green sill investigation. 23.03.2022: CS  - Resignation Horta Osorio, nomination Axel P. Lehmann new Chairman Resignations of CFO Mathers & General Counsel Cerutt 27.07.2022: CS  Ulrich Körner new CEO Comprehensive strategy review - October 2022: First bank-run - 23.11.2022: CS  Capital increase approved by General Assembly on 0912.2022 2023 - 15.03.2023: FINMA & SNB  - Public statements on Increasing uncertainties- ELA approval 19.03.2023  Point of no Return UBS-CS merger for CHF 3.25 bn. Tentative Conclusions A Few <> which needs to be domesticated. Is this the case? Important: Wait and see! «New UBS>> will look most likely different than it looked right after the merger announcement. 2. Balance sheet: United bank max 2x GDP of Switzerland => not necessarily (too) risky, depends on business-mix. Benefit of <«ring-fenced» bank to analyze in order to alleviate the orderly wind-down. Denial of size limits. 3. 20-30% CET 1 = 4-6x more capital needed than today - not a new requirement but still not realistic. 4. Challenges in the area of liquidity - questionable if LCR stress scenario is still severe enough in a heavy crisis triggered by a significant trust drain. Tentative Conclusions - Resolution 1. Resolution: TBTF regulation must always work irrespective of the type of crisis. 2. Financial Stability Board should work on an in-depth analysis whether or not a restructuring or an orderly liquidation of a G-SIB is «really» a viable option. 3. Ongoing problems: no global bankruptcy law for financial institutions, no multilateral treaty to acknowledge resolution remedies (decrees). 4. The restructuring of CS as Swiss Global Wealth Manager would have worked given the mature status of preparations. But: State aid inevitable in a heavy crisis! Only the state can ensure that the trust of customers and investors can be upheld in such a difficult situation. 5. The orderly liquidation of CS group and at the same time - triggering Swiss emergency plan did most likely not work foreign jurisdiction bear losses, Swiss creditors are protected → expected harsh reactions from abroad would tarnish reputation of Swiss financial market for a long time. 6. How to improve? «Run-off» as potential way out of the dilemma. Run-off means to stop new business and continue/run down existing business in a going-concern Combined with duties for G-SIBs to take adequate preparations the run-off may be a viable option for a successful orderly liquidation of the whole financial group.