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ECONOMY

Swiss regulator vows to hold Credit Suisse bosses to account after its emergency takeover

Swiss financial regulator Finma is probing how to hold bosses at Credit Suisse to account following its emergency takeover by rival UBS, a media report said on Sunday.

credit suisse building and a clock in switzerland
A Credit Suisse building. Photo: Fabrice COFFRINI/AFP

“We are not a penal authority but we are exploring the corresponding possibilities,” said Finma chair Marlene Amstad was quoted as saying in an interview with Swiss weekly NZZ am Sonntag.

Switzerland, whose vibrant banking scene is a key part of the country’s culture, has been shocked to the core by the enforced merger of Credit Suisse with UBS at the government’s behest.

A number of observers have voiced fears the new entity emerging from the shotgun marriage will be not so much too big to fail as too large to succeed — even though the SNB central bank maintains the merger avoided triggering a wider banking crisis.

Amstad — who noted the new entity’s capital and liquidity demands would need to grow progressively in accordance with its new size — did not hold back on criticism of the culture which had led to its predicament.

READ ALSO: Swiss sweat over size of new superbank

The upheaval adds to wide banking turbulence caused by the recent collapse of three US banks.

“The problems were not limited to a sole part of the business but spread across various sectors of the group and an expression of an all round inadequate culture of risk,” Amstad added.

He said this translated into a general lack of accountability.

She acknowleded “the bank doubtless has very many employees who work reliably and correctly”, but said this had not been enough.

Credit Suisse chairman Axel Lehmann had sought to pin some of the blame for the bank’s woes on social media, something Amstad rejected.

READ ALSO: How Switzerland reacted to shock UBS buyout of Credit Suisse

“The social media storm was clearly not the cause of the problem at Credit Suisse. These go back a long way.

“The causes were various scandals and mistakes by management in recent years,” she said.

“The bank was already in a crisis of reputation and confidence. At the end of the day, (Credit Suisse) failed because of numerous scandals and bad management decisions.

“The bank’s management cleaved for a long time to a high-risk strategy but was not able to deal with those risks in adequate fashion.

“The problems went on for several years,” Amstad said, adding she was “not naming names.”

Some sector observers have blamed the authorities for not acting sooner but Amstad said Finma had been working behind the scenes and that its actions were not always made public.

She concluded by stressing: “A deficient enterprise culture and strategic appreciation errors on the part of management cannot be totally eliminated by strict regulation.”

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MONEY

What does the latest interest rate cut in Switzerland mean for you?

The Swiss National Bank (SNB) announced on Thursday its second interest-rate cut of 2024. What does this mean for consumers?

What does the latest interest rate cut in Switzerland mean for you?

After cutting the interest rate in March 2024 — from 1.75 to 1.50 percent — Switzerland’s central bank slashed the rate by another quarter percent to bring it down to 1.25. 

Is this a good sign?

Mostly yes.

Firstly, it signals that inflation has fallen — which is definitely a positive development.
 
The SNB, did, in fact, lower its average annual inflation forecast for the rest of 2024  — to 1.3 percent, from 1.4 percent previously.

How will you be able to benefit from this move?

Much depends on whether you are planning to spend your money or save it.

If you are looking to buy big-ticket items that are usually purchased with credit — like homes or vehicles, for instance — then you are in luck.

That’s because when a central bank lowers its interest rates, loans become cheaper. So if you qualify for a loan, this is a good time to apply for one.

In terms of mortgages, they are likely to become cheaper as well when interest rates drop.

This, however, is only the case for new mortgages or ones that are due for renewal.

If you have a fixed-rate mortgage which is not up for renewal, then you will not be able to benefit from lower interest rates.

What about rents?

With the interest rate turnaround — and given a positive forecast on the inflation front — there will probably be no further hikes in the reference interest rates that determine rents in the immediate future.

As to whether you are eligible for rent reduction, that depends on whether your rent is tied to the interest rate — as some 54 percent of contracts are in Switzerland.

If that is the case, and your costs went up when the interest rate did, you can normally seek a reduction.

Keep in mind, however, that factors other than the interest rate come into play in determining rents.

Such factors could include an increase in the cost of building maintenance or insurance, for example.

When is a lower interest rate not a good thing?

If you have money in the bank and depend on it ‘growing’ — that is, yielding profits, you are not in luck.

As the interest rate dwindle, so do returns on your assets.

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