The Ridiculous Case of FINMA’s Secrecy: Investors Left in the Dark Amid CS Downfall!

Credit Suisse is gone
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In a perplexing turn of events, the Swiss regulator, Financial Market Supervisory Authority (FINMA), finds itself at the center of controversy following its decision to resist the disclosure of critical documents amidst the legal turmoil surrounding the Credit Suisse (CS) bailout. The situation has thrown investors into a state of infuriation, sparking a debate on the transparency and accountability of financial regulatory practices.

The Controversy at Hand

At the heart of the dispute lies FINMA’s refusal to provide essential documentation to plaintiffs involved in the appeal proceedings against the write-off of Credit Suisse‘s mandatory convertible notes (AT1 bonds), valued at nearly CHF 16 billion. This move was part of a broader emergency strategy in March 2023 aimed at bolstering the bank’s capital base amid financial distress.

The fallout from this decision has led to a lawsuit backed by a coalition of aggrieved AT1 bondholders, including Swiss pension funds, who argue that FINMA’s actions were disproportionate and tantamount to expropriation. This raises significant concerns about the potential for the Swiss taxpayer to bear the financial brunt of the ordeal.

FINMA’s Dubious Defense

A letter from FINMA to the Federal Administrative Court, which found its way to the public eye via a leak to the Financial Times, outlines the authority’s stance against document disclosure. FINMA’s argument hinges on the premise that releasing confidential information could irreparably damage the trust between the authority and its employees, thereby hampering its supervisory functions.

Moreover, FINMA expresses apprehension over the possibility that the disclosed documents could fuel legal challenges against the Swiss state in international jurisdictions, including the USA, Singapore, Japan, and China. This stance has prompted accusations of Switzerland attempting to shield itself from liability at the cost of legal transparency and fairness.

FINMA seems more concerned about the trust of regulated financial service providers than protecting investors. This, in turn, would be a clear misunderstanding of the mission of financial regulators.

The Irony of Trust

The rationale presented by FINMA—that trust in confidentiality is paramount—strikes as particularly peculiar within the context of regulated financial services. By law, entities under the purview of financial regulation are compelled to disclose necessary information to their supervising authorities, rendering the notion of ‘trust’ irrelevant in this dynamic. This discrepancy has not gone unnoticed, with stakeholders voicing their disillusionment and cynicism towards the authority’s defense.

The Road Ahead

As the Federal Administrative Court in St. Gallen deliberates on the appeal, the extended deadline has left many awaiting a resolution with bated breath. The controversy underscores a broader issue within the realm of financial regulation: the balance between confidentiality and transparency. FINMA’s current stance, perceived by some as a maneuver to protect the state and its institutions at the expense of investors, sets a precarious precedent for regulatory conduct and the pursuit of justice in the financial sector.

The unfolding saga of Credit Suisse‘s bailout and the subsequent legal battle raise critical questions about the integrity and accountability of financial regulators. As the world watches, the outcome of this dispute will likely have far-reaching implications for the principles of transparency and trust within the global financial regulatory framework.


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