Dhe fabulous decline of the once proud Credit Suisse (CS) can be summed up in three numbers. In 2007, the major Swiss bank was worth CHF 100 billion on the stock exchange – last Friday it was CHF 7 billion. And now the traditional bank, founded 167 years ago, is disappearing at a price of three billion Swiss francs in the belly of local arch-rival UBS.
The debacle of the financial giant, which employs 50,000 people and manages customer assets worth more than one trillion francs around the world, can also be described using three episodes from the recent past. There was an outrageous case of espionage, the sale of questionable fund products and a loss-making deal with an American stock market gambler.
In September 2019, while out for a spin in Zurich, Iqbal Khan noticed he was being followed by a car. The Swiss with Pakistani roots previously sat on the board of Credit Suisse, but was released because he wanted to switch to UBS a few weeks later. In CS circles, however, there was a suspicion that Khan would poach former colleagues during this transition phase. So they had detectives after him. But Khan noticed that he was being followed – and tried to confront the pursuer. The whole thing was exposed and culminated in the suicide of the private detective involved. When it came out that Credit Suisse had had other people spied on, then CEO Tidjane Thiam had to go. Irrespective of this, he pocketed a salary of almost eleven million francs for his last year in office.
Bank supervisors attest to serious shortcomings
This case alone made waves at home and abroad and damaged the bank’s reputation. But things got even worse. Credit Suisse had allied itself with the Australian entrepreneur Lex Greensill and his financial boutique Greensill Capital. Greensill took delivery demands from third parties and bundled them into packages, which CS sold to its customers through funds. The bank praised the funds as low-risk and collected ten billion dollars.
But when insurers no longer wanted to secure the financial products, the construction collapsed. Credit Suisse had to liquidate the funds, but was far from being able to repay its customers all the money invested. To date, she has only had access to $7.4 billion. Investors are threatened with losses in the billions – and the bank with claims for damages. In a recently completed investigation into the case, the Swiss Financial Market Authority, or Finma for short, showed that CS had committed blatant omissions. The big bank seriously violated regulatory obligations. The supervisors recognized serious deficiencies in the operational organization and in risk management at CS.
Losses with a New York investment firm
The finding fits the next blow to the neck that hit Credit Suisse shortly after the fund fiasco. It was about dealings with a New York investment firm called Archegos. Its owner, Bill Hwang, had borrowed a lot from a number of banks and invested heavily in stocks. But his stock market bets went horribly wrong. Since CS was not adequately secured and did not react quickly enough, it was left with losses of five billion francs.
These episodes are just three of many other setbacks that have shaken the confidence of customers and shareholders in the bank on Zurich’s Paradeplatz in recent years. Last year, a research network dubbed “Suisse Secrets” unearthed a list of questionable Credit Suisse customers, including autocrats, criminals, secret service heads and corrupt politicians from abroad. The bank had apparently ended most of these customer relationships long ago; most of them came from a time when Switzerland did not yet supply any account data to foreign tax authorities. Nevertheless, the publications brought to mind old clichés about the nefarious behavior of Swiss financial institutions.