Explanation:
During the crisis leading up to the UBS takeover of Credit Suisse, one of the major weaknesses identified in the Swiss resolution framework was the lack of a formalized Public Liquidity Backstop (PLB). A PLB is an essential tool to guarantee sufficient funding to a systematically important bank in resolution when market liquidity dries up. The absence of an active PLB forced Swiss authorities to use emergency ordinances to provide necessary liquidity backing, exposing a gap in their financial stability framework.
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Q.33 Despite having undergone extensive resolution planning in the years leading up to the crisis, the resolution of Credit Suisse presented certain challenges. Which of the following was identified as a weakness in the resolution framework exposed by this case?
A
Difficulty in restoring market trust post-intervention.
B
Lack of pre-planning for potential bank failures.
C
Insufficient public liquidity backstop mechanisms.
D
Absence of cross-border cooperation protocols.
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