The global regulatory regime for “too big to fail” banks set up after the 2008 crisis does not work, according to Switzerland’s finance minister. In an interview with Swiss newspaper NZZ on Saturday, Karin Keller-Sutter — who was at the centre of Swiss authorities’ rush to rescue Credit Suisse last weekend — said following the emergency protocols that are at the centre of the regulatory architecture for big banks “would have triggered an international financial crisis”.
Capital buffers and extra regulatory rules on risk have been useful for navigating times of stress, Keller-Sutter said, but in a real crisis, plans to facilitate the orderly rescue or wind-down of big banks are inadequate.
“Personally I have come to the conclusion . . . that a globally active systemically important bank cannot simply be wound up according to the ‘too big to fail’ plan,” she said. “Legally this would be possible. In practice, however, the economic damage would be considerable.”