Swiss central financial institution guarantees regulation evaluate after Credit score Suisse collapse

Thomas Jordan, President of the Swiss National Bank (SNB), addresses the bank’s Annual General Meeting in Bern, Switzerland, on Friday, April 28, 2023.

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The Swiss National Bank on Friday pledged to review banking regulations during its annual general meeting in Bern following the recent turmoil at Credit Suisse.

Against the backdrop of protesting his actions on climate change and his role in bailout Swiss credit to the Swiss rival UBSThomas Jordan, Chairman of the SNB’s Governing Board, said that banking regulation and supervision need to be reviewed in light of recent events.

“This requires in-depth analysis … quick fixes must be avoided,” he said, according to a statement.

The central bank played a key role in brokering the bailout of Credit Suisse over a chaotic weekend in March, when a flight of deposits and a falling share price brought the 167-year-old institution to the brink of collapse.

The deal remains riddled with controversy and legal challenges, particularly over the lack of investor input and the unconventional decision to nix 15 billion Swiss francs ($16.8 billion) of Credit Suisse AT1 bonds.

The demise of the country’s second-largest bank has fueled widespread discontent and severely damaged Switzerland’s long-standing reputation for financial stability. It also came against a feverish political backdrop, with federal elections due in October.

Jordan said on Friday that future regulation “must require banks to hold sufficient assets that they can pledge or transfer at any time without restriction and thus provide collateral for existing liquidity facilities.” He added that this would mean his central bank could provide the necessary liquidity in times of stress without the need for an emergency law.

A shareholder with a placard that reads ‘Invest in the planet, not its destruction’ in German takes part in a protest in front of the Swiss National Bank (SNB) general assembly April 28, 2023 in Bern. (Photo by Fabrice COFFRINI/AFP) (Photo by FABRICE COFFRINI/AFP via Getty Images)

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The SNB faced questions and complaints from shareholders about the situation at Credit Suisse on Friday, but the country’s network of climate activists also sought to use the central bank’s unwanted spotlight to question its investment policies.

Unlike many major central banks, the SNB operates as a publicly traded company, with just over half of its share capital of around 25 million Swiss francs ($28.1 million) held by public shareholders – including various Swiss cantons (states) and Cantonal banks – while the rest shares are held by private investors.

More than 170 climate activists have now bought an SNB share, according to the SNB Coalition, a committed advocacy group that emerged from the Alliance Climatique Suisse – an umbrella organization representing around 140 Swiss environmental campaigns.

Around 50 of the activist shareholders were in attendance Friday, and activists had planned to deliver around a dozen speeches on the shareholders’ meeting stage, climate activist Jonas Kampus told CNBC on Wednesday. There were also protests outside of the event.

The group is calling on the SNB to divest its holdings in “companies that cause serious environmental damage and/or violate fundamental human rights,” citing the central bank’s own investment guidelines.

Activists have highlighted SNB holdings in particular rafters, sleeve, Total Energies, ExxonMobilRepsol, Enbridge and Duke Energy.

Members of a Ugandan community objecting to TotalEnergies’ East Africa crude oil pipeline are also expected to be present on Friday, with one planning to speak directly to the SNB directorate on stage.

Alongside a complete phase-out of fossil fuel investments, activists are calling for the SNB to implement the “one-to-one rule” – a capital requirement designed to prevent banks and insurers from benefiting from activities that are detrimental to the transition to net – Zero impact.

In this context, for every franc used to finance new exploration or extraction of fossil fuels, the National Bank would have to set aside one franc of its own funds to cover potential losses.

Ahead of the AGM, the central bank declined to call off three motions filed by the activists on legal grounds, and said Wednesday it would not comment on the protest plans, instead referring CNBC to its formal agenda. However, Kampus indicated that the very process of submitting the applications themselves helped increase public and political awareness of the issues.

“From all sides there is public pressure and also political pressure that the SNB has to change something. Right now the SNB is really far behind on its actions compared to other central banks,” Kampus told CNBC by phone. and adds that the SNB is “very conservative” about its mandate in terms of price stability and financial stability, which is “very narrow”.

The shareholder cause is also backed by a motion in Parliament, with backing from lawmakers ranging from the Greens to the centre [center-right party]calling for the SNB’s mandate to be expanded to include climate and environmental risks.

“While other central banks around the world are going well beyond the steps taken by the SNB in ​​this regard, the SNB has repeatedly taken the position that its mandate does not allow it sufficient leeway to fully integrate climate risks into its decisions and monetary policy tools,” it said in the motion tabled on March 16 by Green MP Delphine Klopfenstein Broggini.

“The present parliamentary initiative is intended to ensure this leeway and make it clear that the SNB must take climate risks into account in its monetary policy.”

The motion argues that climate risks “are recognized globally as significant financial risks that can threaten financial and price stability,” and concludes that it is “in Switzerland’s overall interest that the SNB proactively address these issues.” other central banks are striving for.

Kampus and his collaborators hope the post-Credit Suisse crisis national focus on the SNB will provide fertile ground to raise concerns about climate risk, which he says poses a risk to the financial system “several times greater ” is considered the potential consequences of Credit The Collapse of Switzerland.

“We believe that there is also a chance that the SNB might be a bit more modest this time because they obviously did some things wrong in relation to the Credit Suisse crash,” said Kampus.

He noted that the central bank has always maintained that climate risk has been built into its models and that there is “no need for further dialogue with the public about more transparency”.

“A central aspect of the work of the SNB is that the public simply has to trust them. Confidence is something that the central bank cares a lot about, and demanding confidence from the public without leading to it or backing it up with further evidence that we can trust them in the long run is pretty scary, especially when we don’t know what their climate model is,” he said.

The SNB has long argued that its passive investment strategy, investing in global indices, is part of its mandate to remain market neutral and that it is not for the central bank to engage in climate policy. Activists hope mounting political pressure will eventually force a legislative change to expand the SNB’s mandate to include climate and human rights as risks to financial and price stability.

UBS and Credit Suisse also faced protests from climate activists over investments in fossil fuel companies at their respective shareholder meetings earlier this month.