The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
A landmark inquiry into Credit Suisse's collapse has criticized Switzerland's financial regulator Finma for granting inappropriate capital relief in 2017, which masked the bank's deteriorating condition and delayed corrective measures. The inquiry has prompted calls for stronger regulatory powers and reforms in Switzerland's financial system.
Key Findings from the Parliamentary Report
1. Finma's Role and Failures
Regulatory Filter Misstep:
- Finma allowed Credit Suisse to report stronger capital levels through a regulatory filter, which obscured the bank's precarious financial state.
- This concession was deemed legally sound but inappropriate and contributed to the bank's ultimate collapse.
Ineffective Oversight:
- Finma failed to enforce corrective measures despite identifying multiple deficiencies at Credit Suisse over the years.
2. Broader Systemic Issues
Government Delays:
- The Swiss government took too long to implement reforms from the 2008 financial crisis, such as creating tools for rapid liquidity support.
Insufficient Accountability:
- Finma conducted eight proceedings against Credit Suisse staff but imposed no individual penalties or bans.
3. Recommendations for Reform
Empowering Finma:
- Introduce powers to fine both systemically important banks and individual bankers.
- Implement a Senior Manager Regime to hold individuals accountable.
Curbing Bonuses:
- Propose a ban on bonuses when banks are unprofitable.
Strengthening Too-Big-To-Fail Rules:
- Align regulations with international standards and tighten capital requirements for large banks like UBS, which now bears increased systemic importance.
Impact and Next Steps
Legislative Reforms:
- The findings will shape new financial regulations, with measures like UBS’s heightened capital requirements potentially taking effect by 2026.
UBS Reaction:
- UBS supported the report's conclusions, which highlighted Credit Suisse’s reliance on regulatory concessions to sustain an unsustainable business model.
Implications for Swiss Finance:
- These changes aim to restore confidence in Switzerland’s financial center and prevent future crises.
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