ZURICH (Reuters/Web Desk) – Switzerland's financial regulator wants to discuss the ability to claw back bonuses from bankers as part of stronger powers following the fall of Credit Suisse and sale to UBS.
"The question is on the table and must be discussed now," FINMA Chairwoman Marlene Amstad told newspaper Schweiz am Wochenende, when asked about the right to demand bonuses be repaid.
"The Credit Suisse case shows that for decades the bank has incurred losses and at the same time paid out high bonuses," she said in the interview on Saturday.
"We, therefore, need a better legal basis so that FINMA can intervene earlier and more systematically." FINMA has already demanded stronger powers to oversee lenders in future after it came under fire for its tepid response to the mounting problems at Credit Suisse before the bank's crash in March.
The regulator has previously said it wanted the ability to issue fines, publish details of enforcement proceedings, and increase accountability by establishing a set of rules that identify specific responsibilities for senior executives - mirroring a framework adopted in Britain.
FINMA cannot currently exercise these powers, with the decision on whether to grant them in future a matter for the Swiss parliament, said Amstad, who has led the watchdog since 2021.
"In the money business, money plays a role," she told the newspaper. "That's why we need fines and why we need the right incentives when it comes to remuneration."
The power to publicise FINMA's proceedings in future would also help, Amstad said.
"We have teeth and use them, but we should also be allowed to show them," she said. "Today, the law requires that many of our actions remain publicly invisible, which in turn can be interpreted as inaction.
"The Credit Suisse case has once again shown us how important it is to inform other market participants and the public. With this strict obligation of confidentiality regarding measures taken, Switzerland is an exception internationally."
FINMA also wanted to have a say in remuneration models at banks, although this did not mean setting wages, Amstad said.
"That's not our job," she said. "But we need more legal means to intervene in the remuneration system."
IT’S NOT JUST BANKS OR SWITZERLAND
The bosses or executives are paid more at an exponential rate while the workers down the line aren’t. This story is not limited to the banking sector or one country. The rising pay gap is a worldwide phenomenon and practiced in almost all industries albeit the difference is starker in tech or banking.
We can notice it around us in Pakistan too where even many executives are among the millionaires – thus becoming part of the upper middle class and rubbing shoulders with the elite.
According to the Economic Policy Institute, the ratio of CEO-to-typical-worker compensation in the US was 20-to-1 in 1965 and 59-to-1 in 1989.
But things have changed – worsen would be the precise expression – that pay gap reached 399-to-1 in 2021 – a manifestation of concentration of wealth and widening rich-poor divide.
The inability to deal with the situation – partially, if not mainly – a rising out of “the end of history” after the fall of Berlin Wall is responsible for the social discontent in the developed democracies, as the people have questioned whether they represent the people or the business interests.
It’s not just widening pay gap as the governments followed Thatcherism – privatisation and reduced government expenditure on social services and security to ensure a limited state role – which is frustrating for the masses.
Meanwhile, the consequences are much more serious for nations like Pakistan where the very concept of social security in the cash or subsidised services is missing.