Swiss Watchdog Needs Power to Cut Bank Bonuses, Ex-CEO Angehrn Says

(Bloomberg) — Switzerland’s financial regulator Finma should have the power to rein in bank bonuses if the country wants to prevent future crises, its former chief executive officer said Tuesday.

Finma needs to be able to exert “influence over the compensation architecture and individual, let’s say, bonus pool decisions of the large banks,” Urban Angehrn told Bloomberg TV in his first interview since his resignation last September. The current setup only let’s Finma formulate guidance on bonuses, “but from a legal point of view that’s not a very strong piece of legislation,” he said.

The comments come on the first anniversary of UBS Group AG’s takeover of Credit Suisse in an emergency deal brokered by the government. That followed years of scandals and restructuring at Credit Suisse, with its ultimate collapse raising questions about Finma’s efficacy. 

Read More: UBS Powers Past $100 Billion One Year After Credit Suisse Shock

Switzerland is now overhauling its financial regulation and the government is set to publish a key report on the topic next month. Finma has urged the government to give it the power to shape bonus decisions, fine lenders and punish senior managers. 

In the interview on Tuesday, Angehrn also advocated for the introduction of a so-called senior manager regime, which would require banks to assign responsibilities for the decisions they make to individual employees. That makes it easier for regulators to go after them if subsequently a decision turns out to have been bad. 

“Really pinpointing individuals at the bank and having a name behind the decision, responsible for that decision, with all the consequences” would be a positive regulatory development for Switzerland, Angehrn said. It would be “an important tool to prevent a future crisis,” he said.

Switzerland’s central bank also published its views on Tuesday on what financial regulation should be reformed. Regulators should re-examine whether the capital requirements placed on UBS are adequate given its increase in systemic importance, it said.

The Credit Suisse takeover has blown UBS’s balance sheet up to about twice the size of the Swiss economy. 

Angehrn was one of the key people at the table when the Credit Suisse takeover was negotiated between the government and the banks. He resigned last September as Finma’s CEO, saying the crisis had taken a toll on his health.

–With assistance from Kriti Gupta, Anna Edwards and Guy Johnson.

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