UBS, the bank which took over the collapsed Credit Suisse, has a balance sheet worth $1.695 trillion. It overshadows the Switzerland’s home economy. It is twice the size of the GDP of home country. HSBC’s balance sheet in terms of leverage of exposure is worth 83 per cent of UK’s GDP. BNP Paribas is equal to 72 per cent of France’s GDP. At the same time, JPMorgan Chase, the world’s largest bank is just 17 per cent of US GDP.

UBS should not be in distress, as it would burden Switzerland unbearably. There are three other systematically important Swiss banks — their sizes range from 15 per cent to 37 per cent of GDP.

Credit Suisse failed because of its top management (board and executives). There were years of bad strategy and faulty management decisions. The executives kept changing but there were new scandals and losses with each new batch of executives. Far too much capital, and far too less return dragged it down. Discipline and risk-return were ignored.

The regulator conducted several investigations and issued several reprimands. There were a few criminal charges. There was action against the staff. As the whole banking sector would be affected adversely, regulators do not name and shame people and institutions. There are punitive fines and dressing down in regulator’s offices.

The gradual collapse could be seen coming, but regulator cannot put restrictions. The intervention comes when the institution is on the brink of collapse. Despite being aware about the shortcomings, the regulator could not direct the bank on the right path. The management refused to face the truth.

There was loss of liquidity at Credit Suisse. Depositors fled. There were collaterals to raise funding. It was not possible to transfer the collaterals from the group holding company legally to its overseas units.

The US, UK and Europe have realized this issue and have asked the banks there to use liquidity facilities to prevent the speedy runs on banks in modern times.