This article first appeared on ntv.de.
It was just ten years ago and it seems to have been a different era for Credit Suisse: at the beginning of the past decade, the major Swiss bank was named the world’s best retail bank three times in a row. Compared to many of its competitors, the traditional Zurich company survived the global financial crisis relatively well and was considered the partner par excellence to whom the rich and super-rich around the world entrusted their wealth. After a whole series of scandals, there is not much left of this prestige, the trust of customers and, in some cases, their money. To forestall the collapse, arch-rival UBS takes over Credit Suisse in a state-backed deal.
Credit Suisse not only posted a record loss for the past year. Customers withdrew more than 100 billion Swiss francs. An end to these outflows was not foreseeable until recently. After the bank admitted that its financial reporting controls for both 2022 and 2021 showed significant shortcomings and failed to meet the requirements of both auditors and regulators, the share price initially plummeted and then fell to a record low. Finally, over the weekend, under pressure from the Swiss government, the central bank and the financial regulator, the final end of Credit Suisse was sealed.
How could the former pride of the Swiss financial sector sink so low? An overview of some of the scandals that have rocked Credit Suisse in recent years:
Bank boss Tidjane Thiam and the ambitious rising star of wealth management at Credit Suisse, Iqbal Khan, are increasingly at odds. Their neighborhood dispute over the million-dollar villas on Lake Geneva is spectacular and amusing for the public. Among other things, it is about construction site noise and trees that obstruct the view of the lake. At a New Year’s reception in 2019, the dispute escalated openly, and the wives are said to be involved. Eventually, the frustrated Khan left Credit Suisse and joined arch-rival UBS. Concerned that the manager could take trade secrets, customers and, above all, talented employees to the competition, Credit Suisse has Khan followed by private investigators. But they act so unprofessionally that the banker under observation notices his pursuers and confronts them directly. A scuffle ensues, the police are called in and the whole thing is exposed. Bank boss Thiam denies having commissioned the illegal surveillance operation or having known about it. However, the episode, including the subsequent trials, causes deep cracks in the bank’s reputable facade.
As it turned out in the following years, criminal business had been going on behind the scenes for a long time. In 2020, it came to light that Bulgarian drug smugglers had been laundering their money at Credit Suisse for years. Both the bank and a responsible employee were later convicted. The almost complete absence or non-observance of measures against money laundering in the case, which is said to have dragged on at least from 2004 to 2007, caused a stir.
The collapse of British financial firm Greensill Capital in 2021 was a scandal in itself. For Credit Suisse, however, the bankruptcy of the supply chain financier turned into a fiasco in its own right. Bank officials had pushed billions of dollars in greensill bonds on their wealthy clients without informing them of the risks involved.
Also in 2021, the implosion of the hedge fund Archegos shocked the financial market worldwide. Fund owner Bill Hwang had speculated extremely risky with a high level of debt and at times built up assets of $ 36 billion. In the end, however, the house of cards collapsed within a very short time due to price fluctuations on the stock exchange. It turned out that no major bank had supported Hwang in his financial juggling like Credit Suisse. The bank was left with a loss of more than five billion dollars. An independent investigation confirmed a fundamental failure in the risk management and the corresponding control mechanisms of the investment banking division.
Between 2012 and 2016, Credit Suisse collected more than a billion dollars from investors for bonds with which poverty-stricken Mozambique allegedly wanted to build a tuna fishing fleet. However, a significant portion of the money never made it to Mozambique. Around 50 million flowed into the pockets of Credit Suisse employees. The scandal drove Mozambique into a deep financial crisis. Bond investors lost hundreds of millions of dollars. The tuna bonds eventually cost Credit Suisse hundreds of millions of dollars in damages and penalties.
Under the name of Suisse Secrets, the “Süddeutsche Zeitung” last year revealed information from a data leak with information about tens of thousands of Credit Suisse customers, including well-known criminals, dictators and tax evaders. The reports caused outrage around the world.
In addition to home-made scandals, Credit Suisse, like all banks, is struggling with the consequences of the global crises and above all the war in Ukraine. Sanctions against Russian super-rich also affect Credit Suisse customers. The biggest challenge for the bank, however, is regaining the trust of customers. The prerequisite for this would be an end to the series of scandals and thus a consistent change of course at the bank. Despite all the assurances of the management, which has changed several times in recent years, that is not in sight. The admission of flawed financial reports for the past two years is the most recent example.
