The Credit Suisse Collapse: A Blueprint for Reform in Risk Governance?

The collapse of Credit Suisse in 2023 was not just a banking failure—it was a systemic shockwave that exposed the fragility of modern financial governance. For years, the Swiss bank’s board and executives ignored repeated red flags: a toxic mix of strategic mismanagement, poor risk culture, and a litany of scandals that eroded client trust [1]. By the time regulators intervened, it was too late. The Swiss National Bank (SNB) and Swiss Financial Market Supervisory Authority (FINMA) were forced to orchestrate a fire-sale merger with UBS, wiping out bondholders and triggering a global debate about accountability and regulatory preparedness [4].

The Governance Failures That Built a Time Bomb

Credit Suisse’s downfall was rooted in a failure of institutional accountability. FINMA’s post-crisis report revealed that the bank’s governing bodies failed to address “serious deficiencies in risk management and risk culture” despite 43 preliminary investigations and 108 on-site reviews between 2018 and 2022 [1]. Even as the bank met regulatory capital and liquidity requirements, its reputation crumbled under the weight of scandals like the Greensill Capital fiasco and the Archegos blowup. These events exposed a critical gap: regulatory metrics focused on balance sheets, not the intangible but vital element of trust [3].

The Swiss government’s attempt to claw back bonuses from 1,000 Credit Suisse executives in 2023 further highlighted the limits of accountability. A 2025 court ruling deemed these cuts unlawful, citing Swiss constitutional protections for property rights [3]. This legal setback underscored a broader problem: without enforceable mechanisms to penalize executives for long-term governance failures, banks remain incentivized to prioritize short-term gains over stability.

Regulatory Reforms: A Step Forward, But Not Far Enough

In response, Switzerland has rolled out a suite of reforms aimed at preventing future crises. The 2025 Banking Act amendments impose stricter capital requirements on UBS, mandating an additional $26 billion in reserves to cover international risks [2]. FINMA has also been granted expanded powers, including the ability to impose fines and enforce a Senior Managers Regime (SMR), which would tie individual accountability to decision-making [1]. These measures are critical, but critics argue they remain reactive rather than proactive. For instance, the SMR is still in its infancy, and UBS’s recent $300 million settlement with the U.S. DOJ over legacy liabilities shows how easily accountability can lag behind reform [3].

Globally, the Financial Stability Board (FSB) has echoed these concerns. Its 2023 review of bank failures emphasized the need for “flexible resolution frameworks” and stronger cross-border coordination, particularly for institutions that are not officially designated as global systemically important banks (G-SIBs) but still pose risks [5]. The Credit Suisse case proved that even non-G-SIBs can destabilize markets if governance fails.

The Investor Takeaway: Governance Is the New Alpha

For investors, the Credit Suisse saga is a cautionary tale. Traditional metrics like capital ratios and liquidity coverage ratios are no longer sufficient. Instead, focus must shift to qualitative factors: the strength of a bank’s risk culture, the clarity of its governance structures, and the enforceability of accountability mechanisms.

The Swiss experience also highlights the importance of regulatory alignment. While Basel III’s finalization in 2025 has introduced stricter operational risk standards, gaps remain in how countries handle cross-border bail-ins and liquidity backstops [2]. Investors should monitor how jurisdictions like the U.S. and EU adapt their frameworks to close these loopholes.

Conclusion: A Fragile Road Ahead

The Credit Suisse collapse was a wake-up call. While Switzerland’s reforms are a step in the right direction, they remain incomplete. Without a robust legal framework to hold executives accountable and a global consensus on resolution mechanisms, the risk of another crisis looms. For now, investors must tread carefully—prioritizing banks with transparent governance and regulators who enforce it.

**Source:[1] FINMA publishes report and lessons learned from the Credit Suisse crisis [https://www.finma.ch/en/news/2023/12/20231219-mm-cs-bericht/][2] Switzerland toughens “too big to fail” rules in wake of Credit Suisse crisis [https://www.grip.globalrelay.com/switzerland-toughens-too-big-to-fail-rules-in-wake-of-credit-suisse-crisis/][3] UBS's $300M Settlement and the New Era of Banking [https://www.ainvest.com/news/ubs-300m-settlement-era-banking-sector-risk-resolution-2508/][4] The Handling of the Credit Suisse Failure in Light of the FSB’s Key Attributes for Global Systemically Important Banks [https://link.springer.com/article/10.1007/s40804-025-00343-y][5] FSB review of 2023 bank failures assesses implications for the international resolution framework [https://www.fsb.org/2023/10/fsb-review-of-2023-bank-failures-assesses-implications-for-the-operation-of-the-international-resolution-framework/]