A year on from Credit Suisse’s rescue, banks remain vulnerable

Authorities are addressing banking vulnerabilities post-Credit Suisse crisis, focusing on liquidity, emergency cash access, and strengthening controls.

A year after the banking crisis that felled Credit Suisse, authorities are still considering how to fix lenders’ vulnerabilities - including in Switzerland, where the bank’s takeover by rival UBS created a behemoth.

The Swiss government-sponsored rescue of Credit Suisse and U.S. bank salvages in March 2023 doused the immediate fires kindled by a run at little-known U.S. regional lender Silicon Valley Bank.

But regulators and lawmakers are only starting to address how banks could better withstand deposit runs, and whether they need easier access to emergency cash. A top global financial watchdog recently warned Switzerland must strengthen its banking controls, highlighting the risk that a failure of UBS - now one of the world’s biggest banks - would pose to the financial system.

“The banking system is no safer,” said Anat Admati, professor at the Stanford Graduate School of Business and co-author of the book “The Bankers’ New Clothes: What’s wrong with banking and what to do about it.”

“Global banks can cause a lot of harm,” she added.

Rules introduced after the 2008 financial crisis did little to avert last year’s crash, as clients pulled cash from banks at unprecedented speed.

One of the key weaknesses that emerged last year was that banks’ liquidity requirements proved insufficient. Credit Suisse saw billions of deposits exiting in a matter of days, burning through what had appeared to be comfortable buffers of cash.