The rescue of Credit Suisse has brought calm to the financial markets. But this new banking crisis taints the model of the safe of Europe. The reputation of Swiss banks is now in the hot seat.
Credit Suisse has been suffering from this loss of confidence for several months now. Its big institutional clients started withdrawing their money long before the crisis hit. No doubt frightened by the cascading problems that the bank’s leaders have been unable to overcome. There were governance issues, dark tales of espionage between executives under Tidiane Thiam, then reckless exposure to Greensill, a bankrupt company in 2021, money laundering charges of tax evasion. And finally a recapitalization for nothing in December: the four billion dollars contributed by the shareholders have gone up in smoke in the rout of recent days. A bank that experiences such a dark series and that pushes the entire planet to the brink of a new financial crisis has reason to doubt its structural solidity.
Especially when the bill is so salty
First for its shareholders. In the turmoil, the first of them, the Saudi National Bank, lost one billion Swiss francs, the equivalent in euros. The Qatar Investment Fund and the Norwegian Sovereign Wealth Fund, other leading shareholders, also suffered heavy losses. For investors who held so-called subordinated bonds, that is to say high-risk assets, it’s much worse: they lost everything, a total of 16 billion euros. A dead loss endorsed by the saviors of the bank, much criticized in the world of finance. Efficiency, robustness and reliability, all qualities appreciated by Swiss banks, were singularly lacking in Credit Suisse and the firefighters responsible for putting out the fire.
Qualities that have attracted fortunes around the world for more than two centuries
By guaranteeing the greatest discretion in the management of assets, thanks to the legendary banking secrecy, and the absolute security of investments, Swiss banks have become over time the first haven in the world for the ultra-rich. In the coffers of the country sleep rivers of diamonds, gold bars, and of course mountains of cash managed by the banks. Banking sector assets represent the equivalent of six times the country’s gross domestic product. A ratio disproportionate to the size of the economy. Not without risk. Since foreign capital is mobile by nature, it could very quickly vanish if the famous guarantees that Swiss banks have offered until now are permanently called into question.
This is not the first time that a Swiss systemic bank has been in danger
UBS the number one in the sector which has just taken over Credit Suisse has been bailed out by theANDtat at the time of the 2008 crisis. Two systemic banks in distress in less than 15 years in a single country, that’s a lot: 2008 marked the beginning of trouble for the Swiss financial centre. The end of banking secrecy, its historic asset, in 2018, deals a new blow to Swiss banks. This standardization will significantly reduce margins in wealth management. This activity remains very lucrative. UBS is the world number one. Its merger with Credit Suisse will therefore lead to a behemoth without local competitors. An anomaly in the land of moderate competition. A “monster” according to a Zurich daily, which may have avoided a global financial debacle, it is too early to say. On the other hand, it is clear that this forceps rescue confirms the decline of the famous Swiss model.
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