Switzerland’s Financial Watchdog Under Fire as It Attempts to Rein In UBS After Credit Suisse Takeover

Switzerland’s financial watchdog, FINMA, stands at a crucial juncture as it attempts to strengthen its oversight of the country’s prominent banking sector, particularly in the wake of Credit Suisse’s collapse. Under the leadership of Marlene Amstad, FINMA is pushing for increased regulatory powers, including the ability to impose financial penalties on errant banks—a standard practice among global regulators but still absent from its arsenal.

This regulatory push has encountered significant resistance from Switzerland’s banking establishment, especially UBS Group AG, which absorbed Credit Suisse in a government-engineered rescue. The conflict intensified after FINMA published a critical report on Credit Suisse’s downfall, highlighting management failures and regulatory shortcomings that preceded the bank’s demise.

The Regulatory Power Struggle

The core of the dispute revolves around proposed reforms that would grant FINMA more substantial enforcement capabilities. Currently, the regulator lacks the authority to impose fines—an anomaly among global financial supervisors. This limitation has contributed to a perception of FINMA as a relatively toothless watchdog in comparison to counterparts like the UK’s Financial Conduct Authority or the US Securities and Exchange Commission.

Amstad, a former SNB Council member who took over FINMA in 2021, has been vocal about the need for stronger oversight tools. Her position gained urgency following Credit Suisse’s collapse, which exposed vulnerabilities in Switzerland’s regulatory framework. While FINMA had identified issues at Credit Suisse years before its failure, its ability to enforce meaningful changes was constrained by limited powers.

The banking industry’s resistance is led by UBS, which now dominates Switzerland’s financial landscape after acquiring Credit Suisse. UBS executives have publicly pushed back against expanded regulatory authority, arguing that existing regulations are sufficient and that additional powers could harm Switzerland’s competitive position as a global financial center.

This standoff occurs against a backdrop of Swiss financial tradition, where banking giants have historically wielded substantial influence over regulatory matters. The banking sector represents approximately 9% of Switzerland’s GDP, giving financial institutions significant economic and political leverage.

Despite industry opposition, Amstad remains committed to reform. FINMA’s detailed report on Credit Suisse’s failure explicitly called for enhanced regulatory tools, including financial penalties and the power to publish enforcement actions without bank consent—abilities that most other major financial regulators already possess.

The Swiss government has shown some support for strengthening FINMA, with the finance ministry reviewing potential reforms. However, progress remains slow, and the final shape of any regulatory changes will likely reflect continued negotiation between regulatory ambitions and industry concerns.

The outcome of this regulatory tug-of-war will determine Switzerland’s approach to financial oversight in the post-Credit Suisse era. At stake is the country’s reputation as both a premier banking destination and a jurisdiction with credible financial supervision—a balance that has become increasingly difficult to maintain following one of its largest financial institutions’ spectacular collapse.