Credit Suisse, the bank that pays the price for its 1,001 scandals

Published on : 03/18/2023 – 07:18

Cocaine, yakuza, corruption in Africa, espionage, tax evasion, or even a feathered Prime Minister. So many subjects that are not traditionally associated with a bank. Yet each of them corresponds to one of the scandals that has accompanied Credit Suisse’s slow descent into hell over the past few years.

These are also so many incredible cases that make it possible to understand why the Swiss central bank had to urgently release, on Wednesday March 15, a line of credit of 50 billion dollars for Credit Suisse. And above all, how the problems first encountered by ultra-specialized American regional banks in tech like Silicon Valley Bank (SVB) spread to one of the major institutions of the global banking system.

Liquidity crisis

Because the SVB and the Silvergate bank do not play in the same court as Credit Suisse. The two American banks succumbed because their activities were too focused on a single area: Silicon Valley start-ups for the first and cryptocurrencies for the second. They had no plan B when these two sectors began to suffer economically. “Credit Suisse is a much more diversified bank with clients from very different backgrounds,” said Alexandre Baradez, financial analyst for IG France.

But these three institutions have all been caught in the same trap. “There is a liquidity crisis which affects all the banks. That is to say that they have to deal with a growing number of withdrawal requests and are struggling to satisfy them all”, explains Alexandre Baradez. They certainly have the necessary funds, but they are invested in long-term assets. To have the money right away, they should sell them, “which they refuse to do because it could be interpreted as a sign of poor financial health by investors”, specifies Alexandre Baradez.

Hence the interest of the 50 billion dollars released for Credit Suisse. “For any bank that would have been more than enough to enable it to cope with withdrawals. But in the case of Credit Suisse, that remains to be seen,” says Alexandre Baradez.

Because if it is this pillar of Swiss finance is the first affected in Europe, “it is because the crisis of confidence seems to be particularly acute there”, estimates this specialist. Blame it on years of errors and scandals that the managers of this bank modestly put on the account of a “poorly managed risk culture”.

Dictators and mobsters

The history of shady affairs in which this “venerable” institution founded in 1856 played the leading roles goes back a long way. Already in the late 1980s, Credit Suisse was accused of being the bank that helped Filipino dictator Ferdinand Marcos conceal his wealth. In 1995, a court in Zurich sentenced Credit Suisse to return 500 million to the Filipinos thus despoiled, recalls the Guardian.

The bank also housed money embezzled in Nigeria by dictator Sani Abacha during his reign in the 1990s. the yakuza. One of its bankers helped the Japanese mafia launder about five billion then yen (38 million euros at the 2004 exchange rate), but he was acquitted in Japan arguing that he did not was unaware of the source of the funds.

From the beginning of the XXI^e century to the second half of the 2010s, Credit Suisse went from one tax evasion scandal to another, whether in Italy, Germany or the United States. The American justice even sentenced the bank to a record fine of 2.6 billion dollars in 2014 for having incited thousands of wealthy taxpayers to hide their wealth in Switzerland.

Some of his most prominent clients have also complained about the treatment they received. This is the case of former Georgian Prime Minister Bidzina Ivanishvili who accused the bank of having squandered his money in 2018. Credit Suisse claimed that it was all the fault of one of its bankers, accused of having falsified the statesman’s signature to make stock bets with his funds. The banker committed suicide in 2020, and a Bermuda court ordered the bank two years later to pay more than $500 million to Bidzina Ivanishvili.

But the worst was yet to come: between 2019 and 2022, Credit Suisse experienced “the worst years in its history”, assures the Financial Times. It has lost two CEOs, carried away by extravagant affairs. The first, Tidjiane Thiam, had to resign in 2020 after a spy scandal involving several bank employees. Then, it is António Horta-Osório, a famous Portuguese banker, called to the rescue to turn Credit Suisse around and who had to throw in the towel in 2022 for having… repeatedly violated the health rules relating to confinement during the coronavirus pandemic. Covid-19.

Meanwhile, the bank was accused in 2020 of failing to fulfill its due diligence obligations and thereby funding a Bulgarian drug cartel. Two years later, Credit Suisse became the first bank to be criminally prosecuted in Switzerland in connection with this case.

Crazy sums lost in one year

But above all, she lost crazy sums in 2021. She staked nearly $10 billion in Greensill Capital, a British investment fund, which went bankrupt in 2021 and lost $5.5 billion during the high profile collapse, the same year of Archegos, an obscure hedge fund.

Read also on France 24: Archegos: how an obscure hedge fund shook Wall Street

A succession of missteps and scandals “which shook the reputation of the bank and pushed some wealthy customers to leave”, assures the Financial Times. For several months, the Board of Directors has begun a vast campaign of mea culpa ensuring that the priority was to “change the culture” of the bank. Officials have only asked for one thing: to be given time, because turning the ugly duckling of the banking sector into a swan cannot be done overnight.

And this is precisely what Credit Suisse no longer has since the fall of SVB accelerated everything… starting with the exodus of clients. The European authorities may repeat that the European banking system is more solid than in the United States, “which is true, in particular thanks to the regulations put in place after the 2008 crisis, but if Credit Suisse were to fall, it there would inevitably be other victims”, recognizes Alexandre Baradez. And the financial markets seem determined to want to punish Credit Suisse despite the Swiss bailout: Friday, its stock market action closed down 8.01%.