Credit Suisse CEO Ulrich Körner is leading a major restructuring of the bank. © Keystone / Michael Buholzer
A generalized analysis of what went wrong at Credit Suisse converges on a consistent theme: an international bank that has lost touch with its Swiss roots, run by people who put profits before prudence.
This content was published on February 9, 2023 – 09:09
swissinfo.ch
This has resulted in massive financial losses and a restructuring campaign that will see 9,000 employees lose their jobs.
What happened?
Credit Suisse has teetered from scandal to scandal: spying on a former employee, criminal conviction for allowing drug traffickers to launder money, involvement in a corruption case in Mozambique, a president raping the covid lockdown rules and a massive leak of customer data to the media.
+ The financial consequences for Credit Suisse in 2022
The bank’s credibility has been further affected by soured investments in British financial firm Greensill Capital and US fund Archegos Capital Management, both of which collapsed in 2021.
The 10 billion dollars (9.2 billion francs) of client funds invested in Greensill are unlikely to be fully recovered. And while it wasn’t the only bank to be burned by Archegos, Credit Suisse suffered far greater losses ($5.5 billion) than its rivals.
The Swiss financial regulator criticized the bank for intentionally ignore more than 100 red flags for he has been lured to the edge of a cliff in pursuit of phantom profits.
How did it happen?
Using hindsight to identify a culture of self-destructive risk is the easy part. But it’s harder to explain how that could have happened, especially when so many analysts insist the risks were obvious to spot.
In such circumstances, the finger of blame points to the leadership of the bank.
Former Credit Suisse CEO Oswald Grübel said the rot started when he was replaced in 2007 by US investment banking chief Brady Dougan.
“[Investment banking] was the only company he was interested in,” Grübel told the Blick newspaper in October. “He widened it because the financial incentives there are the most important. Private banking and Swiss-focused activities were not his priorities.”
But while Dougan’s successors preached greater risk-taking responsibility after he left in 2015, it doesn’t appear to have been put into practice.
Senior risk and compliance officers, hired long after Dougan left the bank, are among the executives to have been tossed out amid the latest financial wreck.
Other commentators blame Urs Rohner, who chaired the bank between 2011 and 2021.
The results
In the end, growing financial losses, a plummeting stock market price (CHF 84 in 2007, CHF 3 today), an exodus of wealthy clients and a rapid erosion of the bank’s credibility.
The bank is such an integral part of the Swiss economy that it is deemed “too big to fail” by the financial regulator.
But Credit Suisse also has another important, less tangible value. The bank was founded in 1856 by iconic industrialist Alfred Escher to help finance the Swiss rail system, a crucial part of the country’s industrial renaissance.
This could explain why so many in Switzerland blame the bank’s current troubles on Anglo-Saxon financial excesses weakening its Swiss roots.
Renewal ?
Credit Suisse’s new management team has launched the bank into a sweeping restructuring campaign that will shed some of its riskier business units, cut jobs and bring in additional capital, mostly from the Middle East.
+ Learn more about Credit Suisse’s restructuring plan
“The bank will rely on its main Wealth Management and Swiss Bank franchises,” Credit Suisse promised in October 2021.
“We will remain absolutely focused on driving our cultural transformation, while working to improve our risk management and control processes,” said Chairman Axel Lehmann.
It is not the first time in recent years that Credit Suisse has been described as having reached a crossroads.
Timeline of recent events and key figures
February 2020: CEO Tidjane Thiam is forced to resign amid a scandal over the bank employing private detectives to spy on a former executive.
March 2021: Greensill Capital and Archegos Capital Management collapse, exposing the bank to billions in losses.
April 2021: longtime chairman Urs Rohner (2011-2021) is stepping down after announcing his intention to leave the bank the previous year.
October 2021: the bank is fined $475 million for its role in a corruption scandal in Mozambique dubbed the “Tuna bond” fraud.
January 2022: Credit Suisse chairman António Horta-Osório is forced to resign for breaking Covid lockdown rules during his visit to the Wimbledon tennis tournament.
February 2022: the so-called ‘Swiss Secrets’ leak sees details of 18,000 customer accounts given to the media by a whistleblower.
June 2022: Credit Suisse is the first major national bank to obtain a criminal conviction for money laundering in Switzerland, in connection with a Bulgarian drug trafficking network.
July 2022: CEO Thomas Gottstein is expelled and replaced by Ulrich Körner.
October 2022: Körner and President Axel Lehmann announce 9,000 job cuts and a capital injection of 4 billion francs.
End of insertion
Complies with JTI standards
More: SWI swissinfo.ch certified by the Journalism Trust Initiative