Banking supervision in Switzerland: a brief history of scandals (cross-border guide)

Context

In a nutshell

Swiss banking supervision is marked by scandals and pressure from abroad. The influence of the financial lobby often ends up weakening controls. The Swiss Government plans to give new powers to the banking supervisory authority.

Key facts

• On 4 June 1965, the Federal Council decided to dismiss CFB President Max Hommel with immediate effect. - In 1931, the Banca de Genève collapsed and the Swiss People's Bank had to be supported by the State with 100 million francs. - The Federal Law on Banks and Savings Banks enters into force on 1 March 1935. - The Swiss National Bank (SNB) announced on 26 April 1977 that it would replace Credit Suisse, if necessary with an amount of up to CHF 3 billion.

The history of Swiss banking supervision is marked by scandals and pressures from abroad. However, the influence of the financial lobby often ends up weakening controls.

On 4 June 1965, the Federal Council decided to dismiss CFB President Max Hommel with immediate effect. Hommel had advised two companies of Spanish financier Julio Muñoz, earning 2,000 francs a month. The mandate was particularly hot because Muñoz dealt with the investment in Europe of the assets of Rafael Leónidas Trujillo Molina, the dictator of the Dominican Republic assassinated in 1961.

The collapse of the Banca de Genève in 1931 and the crisis of the Swiss People's Bank, which

Operational details

The Federal Council decided to dismiss CFB President Max Hommel with immediate effect on 4 June 1965. Hommel had advised two companies of Spanish financier Julio Muñoz, earning 2,000 francs a month. The mandate was particularly hot because Muñoz dealt with the investment in Europe of the assets of Rafael Leónidas Trujillo Molina, the dictator of the Dominican Republic assassinated in 1961.

The collapse of the Banca de Genève in 1931 and the crisis of the Swiss People's Bank, which in 1933 had to be supported by the State with 100 million francs, forced the political world to act. The federal law on banks and savings banks was drafted in a hurry. The law came into force on 1 March 1935 and served primarily to protect creditors with provisions on liquidity and own funds. This law required banking institutions to maintain a liquidity ratio of at least 10% of deposits, or 5 million francs for the Swiss People's Bank.

The Swiss National Bank (SNB) announced on 26 April 1977 that it would replace Credit Suisse, if necessary with an amount of up to CHF 3 billion. This move aims to save the big bank from the financial crisis. However, the SNB failed to prevent the collapse of the Gotthard Bank in 1987, which had to be supported by the state with 2.5 billion francs.

This could lead to the creation of a new organism of

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Key points

Banking supervision in Switzerland: a brief history of scandals

The Swiss Government plans to assign new powers to the banking supervisory authority, with the aim of equipping itself with instruments that other countries with financial centres of comparable size have already possessed for some time. This step forward would have been useful to shed light in a timely and exhaustive manner on the irregularities of Credit Suisse, as we have seen recently.

However, an opposition movement against the government's plans is already forming in Parliament. This reflection has a long tradition: the opportunity to introduce state regulation of the banking sector in Switzerland has long been controversial.

A first federal bill dating back to 1916 remained in the drawers of the federal administration until the global economic crisis of the 1930s. The collapse of the Banca de Genève in 1931 and the crisis of the Swiss People's Bank, which in 1933 had to be supported by the State with 100 million francs, forced the political world to act.

The federal law on banks and savings banks was drafted in a hurry. The law came into force on 1 March 1935 and served primarily to protect creditors with provisions on liquidity and own funds.

For example, the banking supervisory authority should be able to impose fines and report non-compliant banks.

The Federal Act on

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Source: tvsvizzera.it