GLOBAL LESSONS FROM THE DEMISE OF CREDIT SUISSE

Authors:

Yvan Lengwiller

Professor of Economics University Of Basel

Beatrice Weder di Mauro

President at Centre for Economic Policy Research, Professor of International Economics at Geneva Graduate Institute (IHEID), Visiting Professor at Hoffmann Global Institute for Business and Society INSEAD

CEPR President

RPN Member, Sustainable Finance

RPN Member, European Economic Policy

RPN Member, International Lending and Sovereign Debt

RPN Member, Geoeconomics

"In this column we present findings that focus on the ‘why’ and ‘how’ of the crisis, emphasising the lessons with broader implications beyond Switzerland. The report holds many detailed recommendations which are specific to the Swiss framework.

Conclusion

Reforms of international financial framework usually take place in the wake of financial crises. Yet every crisis is unique and certainly Credit Suisse’s troubles were unique. Nevertheless, it holds broader lessons for the TBTF regime.

Capital was the dog that did not bark; Credit Suisse failed despite being highly capitalised, a fact underlined by the $29 billion negative goodwill disclosed by UBS. But questions about the quality and transparency of capital may have contributed to the loss of confidence and the role and design of AT1 bonds should be subject to further scrutiny.

For Switzerland, the Expert Group draws many additional lessons and recommends reforms in crisis management, broadening of liquidity provision, and a significant strengthening of the tools and authorities of the financial supervisor.

SOURCE:

https://cepr.org/voxeu/columns/global-lessons-demise-credit-suisse

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