Aymo Brunetti, Professor of Economic Policy at the University of Bern, used to head the expert group for the further development of financial market strategy and was therefore one of the fathers of today’s “too big to fail” rule. For the first time since the announcement of the CS takeover by UBS, Brunetti has commented on the criticism that the regulations had failed.
SRF News: Aymo Brunetti, you helped to draw up the regulations. In the case of Credit Suisse, these “too big to fail” rules are not applied at all. How do you rate that?
Aymo Brunetti: The regulation that the bank should really be sent into bankruptcy is the ultima ratio, so to speak. It has always been said that you have to be able to do it, but that goes extremely far. And an alternative solution has now actually been found that doesn’t go that far and doesn’t cause so many upheavals. In a weighing up of interests, it makes sense that one tries to make such a solution as if one takes the last path.
Still, there’s a feeling that you’ve been working on the rules for years and don’t need them now.
The rulebook consists of a part that applies when the bank is alive, with higher capital and liquidity requirements. That brought a lot of stability. But the second part is about the fact that in a crisis you can split a bank into the systemically important Swiss part and the rest of the bank that can be wound up. A Swiss unit could have been created, I think. In the second part, the assessment was that this could be very disruptive because the financial markets are currently in turbulence.
According to the “Financial Times”, foreign countries have dictated the solution for Switzerland, especially the USA. You would have told the Federal Council what to do, regardless of whether there is a regulation or not.
Of course, foreign countries cannot dictate anything. In addition to the question of whether the systemically important Swiss part can be saved, it was of course relevant for Switzerland whether there was a risk of major upheavals abroad. So it’s understandable that the US and other countries tell us that such a solution would be better for them. But you can’t force us.
One could also say that the “too big to fail” rules weren’t good enough and didn’t work because there could have been potential distortions.
It’s important to analyze exactly why you really couldn’t do it afterwards. Or whether it was a consideration and you could have done it anyway. If you really can’t do it, then you have to question the whole regulation.
I would very much welcome the spin-off of Credit Suisse Switzerland as a bank.
This means that the regulation would have to be revised now, all the more so because UBS has grown even larger.
Yes, especially if it turns out that the CS could actually not be processed – then there really is an increased need for regulatory action.
There are calls to spin off Credit Suisse Switzerland as a bank. How do you see it?
I would really appreciate that. Because you are already creating a very large Swiss unit. It would make a lot more sense if you could split them off. Of course, UBS has the right to decide. But also from UBS’s point of view, the regulatory pressure would be less if you didn’t have such a huge unit in Switzerland. You would also have fewer problems with all the challenges, such as the upcoming job cuts. If you don’t have all of these units in one big bank, that would also be a good thing from the point of view of the Swiss economy.
Tobias Bossard conducted the interview.
More on the subject in “10 vor 10”, at 9:50 p.m. on SRF 1.