In its century and a half of life, Swiss credit he championed his country’s industrialization, helped position Switzerland at the forefront of international finance, and even went head-to-head with the investment banking titans of Wall Street. Over the past three years, a steady pace of scandals and underperformance has demolished Credit Suisse’s reputation not only as a major global player but also as a worthy competitor to local rival UBS. Let’s analyze the chronology of the events that culminated in the acquisition by UBS.
February 2020: A spy scandal topples the CEO
The five-year term of Credit Suisse chief executive Tidjane Thiam ended abruptly on February 7, 2020 after an investigation found the bank had hired private investigators to spy on its former wealth management boss Iqbal Kahn, who left to work for UBS.
Credit Suisse has repeatedly downplayed the incident as an isolated incident, but according to the regulator, the bank had planned seven separate spy operations between 2016 and 2019 and executed most of them.
March 2021: Greensill Capital collapses and Credit Suisse loses money
Greensill Capital, a British financial firm specializing in short-term corporate loans via a complex and opaque business model, goes bankrupt in 2021. Credit Suisse had invested heavily in the firm and was forced to close four related funds in which approximately 10 billion dollars.
According to Swiss financial regulator FINMA, the bank “has grossly breached its supervisory obligations” and has also launched four enforcement proceedings against former Credit Suisse executives.
March 2021: Archegos defaults and Credit Suisse loses money again
Just three weeks after the bankruptcy of Greensill, Credit Suisse loses another 5.5 billion dollars following the bankruptcy of the US family office Archegos Capital Management.
“The Archegos-related losses suffered by Credit Suisse (CS) are the result of a fundamental failure of management and controls at CS investment bank and, in particular, its Prime Services business,” said law firm Paul Weiss, Rifkind, Wharton & Garrisson.
October 2021: a heavy fine for corruption in Mozambique
Credit Suisse has been fined $475 million by US and UK authorities after it became involved in a corruption scandal in Mozambique involving loans to state-owned companies. The loans were supposed to finance maritime surveillance, fishing and shipbuilding projects, but some were diverted for bribes. Mozambique also benefited from a loan from Credit Suisse that was kept secret from the International Monetary Fund. When the IMF became aware of this loan, it withdrew its support for Mozambique, sending the country’s economy into a crisis.
January 2022: the “repairman” leaves after nine months
Antonio Horta-Osorio, former CEO of Lloyds Banking Group, was appointed as the new Chairman of Credit Suisse in May 2021 to right the ship after the bankruptcies of Archegos and Greensill. Horta-Osorio enjoys a strong reputation after he managed to rescue Lloyds from the tide of the global financial crisis and promises to bring better risk management to the core of Credit Suisse’s culture.
However, Horta-Osorio is accused of breaking Switzerland’s Covid restrictions and resigns from his post after only nine months. Back when he was chairman, he said the Credit Suisse crisis was worse than anything he had experienced managing several banks in his three-and-a-half-decade career.
February 2022: data leak from The Suisse Secrets
A journalistic investigation has revealed that dozens of well-known figures, including heads of state, intelligence officials, drug lords and businessmen, known for their involvement in human rights violations, drug trafficking, corruption, money laundering and other serious crimes, have hidden funds in Credit Suisse.
The investigation was based on a leak of data on more than 18,000 bank accounts totaling more than $100 billion in deposits. Credit Suisse has denied the allegations.
March 2022: Bermuda judge sentences Credit Suisse to pay $553 million fine
In late March 2022, a Bermuda judge awarded $553 million in settlements due to the bankruptcies of Credit Suisse Life Bermuda, the local life insurance arm of Credit Suisse. The court found the existence of a fraud committed by a former successful banker of the Swiss bank, Patrice Lescaudron, and the former Prime Minister of Georgia, Bidzina Ivanishvil. Lescaudron was sentenced to five years in prison.
June 2022: money laundering
In June 2022, the Swiss Federal Criminal Court found Credit Suisse and a former employee guilty of failing to prevent money laundering by Bulgarian cocaine traffickers from 2004 to 2008. The bank was fined 2.1 Millions of dollars.
“The company could have prevented the infringement if it had fulfilled its organizational obligations,” the judge said in his ruling, adding that the former employee’s superiors had been “passive.”
Drug traffickers allegedly laundered more than 146 million francs through the bank’s accounts, and the former Credit Suisse employee said during the hearings that the bank continued to handle the funds even after learning of murders and alleged cocaine trafficking. related to customers. The bank denied wrongdoing and said it would appeal the decision.
October 2022: another attempt at a turnaround
The new leadership duo of Chairman Axel Lehmann and Chief Executive Officer Ulrich Koerner have pointed to a return to Credit Suisse’s Swiss roots as the best way forward. They approved a plan to cut 9,000 jobs and managed to raise $4 billion in fresh capital. As part of this fundraising, Saudi National Bank bought a 9.9% stake becoming the largest shareholder of Credit Suisse.
February 2023: Credit Suisse reports massive outflows
The ambitious plan fell short of its mark, as February’s fourth-quarter results showed. Client outflows rose to over 110 billion francs and the bank suffered its largest annual loss since the financial crisis. The bank’s shares fell 15% after the release of the results.
March 2023: final dive
March 8: Credit Suisse is delaying the release of its 2022 accounts because it received a call from the U.S. Securities and Exchange Commission the night before questioning its 2019 and 2020 financial statement revisions, as well as related audits.
March 14: when he finally published his annual report, Credit Suisse admitted it has “substantial weaknesses” in its financial controls and announced an end to board bonuses. The news also came at a time when markets were already fragile due to the bankruptcy of US regional banks Silicon Valley Bank and Signature. “Credit Suisse was already under pressure. Many clients and lenders had lost confidence, leading to substantial withdrawals of funds in the fourth quarter of 2022, and the cost of funding increased as CDS spreads widened,” says the analyst banker of Morningstar, Johann Scholtz.
March 15th: Bloomberg TV asked the president of the Saudi National Bank if he would offer further financial support to Credit Suisse. His response was “absolutely not,” triggering a panic in the markets and causing shares of the lender to tumble 24% by day’s end.
March 16: Credit Suisse shares rebound after the Swiss National Bank provides the bank with new liquidity amounting to 50 billion francs. This answered concerns about short-term capital, but not the question of how Credit Suisse would stem its client exodus. Earlier that day, clearly regretting the words that caused the value of his investment to plummet, Ammar Al Khudairy of the Saudi National Bank referred to the bank’s “strong capital ratios” and clarified that Credit Suisse was “all right.”
March 17: to be honest, not all is well. Credit Suisse ends the week with daily outflows of around $10 billion, as reported by the Wall Street Journal.
March 18: The Swiss National Bank has failed to restore confidence with its credit line and together with the Swiss financial controller FINMA is brokering UBS’s takeover of Credit Suisse in order to shore up the Swiss financial system, reports the Financial Times.
March 19: UBS agrees to buy Credit Suisse for 3 billion Swiss francs in equity and agrees to bear up to 5 billion francs in losses. Bondholders of subordinated AT1 bonds worth CHF 16 billion are wiped out. Shareholders get the equivalent of 0.76 francs per share, 59% less than they were worth at the previous closing and less than a tenth of their value at the time of Tidjane Thiam’s departure in February 2020.
The 167-year history of Credit Suisse has come to an end. UBS is the bank that survived the deal and its shares finished their first trading session after the takeover announcement up 1.3%.