Why did the Swiss business establishment do nothing to save Credit Suisse? Claude Baumann tries to explain why on finews.first.
One bank had a larger impact on economic events in Switzerland last year than all other financial institutions combined. That bank was Credit Suisse. But in the flood of confusing information about the problems it faced, it is really surprising that not one Swiss member of the establishment stood up for it when it was at its lowest point.
The domestic term «Schweiz AG» means «Switzerland Inc.» when technically – precisely − translated. Still, the English term is only a rough approximation of its actual meaning given it is usually used to denote a nebulous mesh of power and interests that includes the business elite, government, and supervisory authorities. Anyway, in 2022, Switzerland Inc just stood by and watched what was happening to the country's second-largest bank.
That meant that an urgently needed capital injection did not come from Zurich, Berne, or Geneva. Instead, it came in the shape of petrodollars from the Middle East. Now, Saudi Arabian and Qatari investors, with little knowledge of Swiss culture and heritage, will have a strong hand in its future.
«Many Swiss citizens started to become increasingly distant, inured even, more than three decades ago»
This is even more surprising when taking Credit Suisse's history into account given that the bank is inseparable from the widespread industrialization of Switzerland more than 150 years ago. It would have been fitting to keep the bank Swiss given it still calls itself a bank for entrepreneurs, something its founder, Alfred Escher, would clearly agree with. Besides, it is also the only alternative to UBS, at least as a major bank.
But reality has turned out differently and it does not just have to do with the turbulence the bank has faced over the last two to three years. The malaise goes much deeper. Its estrangement from Swiss society started more than three decades ago when many Swiss citizens started to become increasingly distant, inured even. It was at that time it engaged in highly ambitious businesses in the US, and it was seen as more international, and American, than its Swiss counterparts. At least that was the claim.
«A cocktail that turned out to be poison for the bank's relationship with its stakeholders»
In the 1990s, all this helped investment banking, a business of M&As, IPOs, and large capital market transactions. Or a great deal of money, much of which ended up lining the pockets of bankers during the bonus season. And it was not by chance that it was the US bankers, with their values, even megalomania, that increasingly held sway at Credit Suisse. They were also the ones who had a very different, even frivolous take, on the bank's risks.
Exorbitant salaries and bonuses while the bank's equity hovered just above minimum pain thresholds. Constant re-organization, bad or mistaken appointments, and negligent mistakes in the US led to a business culture that aimed at maximizing profit in the super-short term. A cocktail that turned out to be poison for the bank's relationship with its stakeholders.
«It still has to be seen whether the voices from Riyadh and Doha will help much in that fashion»
Added to all that was the nonsense of spying on executives, a loose interpretation by some of the standing Covid-19 guidelines, and an almost criminal lack of negligence related to certain business processes. For many Swiss citizens, it simply grew intolerable.
That is also the explanation for why Swiss Inc did not help. They still have a very strong, self-evident understanding of the domestic consciousness. Even though it sounds banal, it was a three-decade-long dismantling of its own values that led to the current situation.
It has been several weeks since the large reorganization announcements were made by chairman Axel Lehmann and CEO Ulrich Koerner. The bank's share price remains below 3 francs and will be the worst performer in the Swiss Market Index (SMI) this year. The calls to give the bank more time fall short. It is not about weeks, months, or years. But about the question as to whether it is in a position to exemplify a new, credible corporate culture.
It still has to be seen whether the voices from Riyadh and Doha will help much in that fashion and whether they can make a contribution to a once-valued hallmark of Swiss banking with business ethics that have nothing to do with the heritage of the country itself.
Claude Baumann is the founder and CEO of finews.ch, finews.asia, which is based in Singapore, and finewsticino.ch for the Italian-speaking region of Switzerland. He has written extensively for the «Weltwoche» and «Finanz und Wirtschaft» publications and is one of the co-founders of publisher Nagel & Kimche. He also launched the business travel magazine «Arrivals» and is the author of several books on the banking industry.
