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No other event had as much impact on fiscal year 2023 as the collapse of Credit Suisse. Until the end, many believed, even hoped, that the worst could still be avoided. But the bank was in such bad shape that only an emergency sale to UBS could have averted a global financial crisis.
It was a gray March Sunday when the financial district shook. The great banking earthquake has been imminent for years. Since mid-2022, foreshocks have been occurring more and more frequently, sending the first shock waves into the financial system and customers fleeing the bank. On March 19, 2023, the rotten framework of the 176-year-old Credit Suisse collapsed with a crash – CS became history.
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The last supports had failed. Even Sergio Ermotti (63) did not expect this. “I never thought CS could reach such a dramatic end,” the Ticino native says in an interview with Blick. A few weeks later, Ermotti was reinstated at the new UBS. His predecessor, Dutchman Ralph Hamers (57), was gracefully dispatched to the desert.
It took one dinner and two days of thinking with UBS Chairman Colm Kelleher, 66, for Ermotti to lead the merger of two major banks. He follows the “call of duty”, as he puts it: “It is a great motivation for me to lead this integration and create added value for shareholders, customers and also for the Swiss financial centre.”
Beginning of the end
CS’s gradual decline gained new momentum in 2015 with the departure of Brady Dougan (64). The American was the last CS CEO to declare risk management a top priority. From this point on, there was no obstacle to toxic risk culture, especially in investment banking.
The unbridled appetite for risk culminated years later in multibillion-dollar fiascos with the American hedge fund Archegos and Greensill Capital. All the fines, damages and settlement payments left deep holes in the bank’s coffers. As a result, CS earned a total of only 800 million francs in the last 15 years of its existence and paid bonuses of 40 billion francs in the same period, despite meager profits.
The bank urgently needed a sustainable business model. But CS’s last bosses, Chairman Alex Lehmann (64) and CEO Ulrich Körner (61), also failed in this regard. In October 2022, the bank submitted a restructuring plan that promises losses for years to come. This sealed the bank’s fate.
Central Bank intervenes
Although many people, especially in Switzerland, don’t really want to admit it. “On the Thursday before UBS took over, outsiders realized how bad CS really was,” says economic historian Tobias Straumann (57).
The previous evening, the Central Bank had provided CS with 50 billion francs in emergency liquidity and reiterated that the bank had met its capital and liquidity requirements. “Until March, you could assume that CS still had a chance. The relevant key figures of the bank were in good shape. The authorities reiterated this over and over again,” recalls Straumann.
But markets and customers have long ceased to be blind. The share price was in the basement and customers withdrew their money. At times, CS lost 10 billion francs a day of client money.
Ermotti relaxes on the sidelines
Now come the four most dramatic days in recent Swiss financial history. Representatives of the Federal Council, the National Bank, Finma and the two major banks met for emergency meetings one after another.
This also raised alarm signals for Sergio Ermotti: “There are no emergency meetings of the Federal Council that are made public without reason. It was clear to me that CS could not continue like this on Monday. Something had to happen over the weekend.”
But he didn’t rush himself: “Until Saturday afternoon I was just an observer,” says the Ticino resident, who is also president of a football club. “I went skiing on Thursday and Friday. On Saturday I watched my FC Collina d’Oro’s football match against Zug 94. “I ignored all the calls until halftime.”
Others could not do this: using the emergency law and bypassing the shareholders of the two major banks, a bailout was prepared and CS was sold to UBS for three billion francs. At 19.30 on Sunday evening, Finance Minister Karin Keller-Sutter (59), Federal President Alain Berset (51), Finma President Marlene Amstad (55), SNB President Thomas Jordan (60) and UBS President Kelleher appeared before him. media – and announced the demise of traditional Credit Suisse. CS President Lehmann sat at the table like a watered poodle.
New rules for banks
The shock in Switzerland was great: news of the “monster bank” spread quickly. UBS’s total assets suddenly increased to more than twice the annual economic output of Switzerland. According to Straumann, due to the size of UBS and the absence of a second large bank, it is clear what will happen if UBS gets into trouble: “Even if the bank is closed, a temporary partial nationalization in the future cannot be avoided. It will then get hurt.”
Politicians immediately called for tighter regulation of banks. These calls have now become quieter: “Many people now understand that CS cannot be saved even with more capital,” Ermotti says today. This means: First, the facts about the death of CS should be put on the table, then the strengthening of Finma and new rules for banks should be considered.
Uncertainty among employees
The integration of CS is currently progressing. This process is expected to be completed in 2026: “This is a marathon and we are only 10 kilometers in,” says Ermotti. “But we know we train well. Make sure we drink and eat regularly. We also know that in every marathon, setbacks happen.” However, the UBS boss believes that the bank will overcome these setbacks and achieve its goal.
But some will fall by the wayside. UBS wants to cut 3,000 jobs in Switzerland alone. It is not yet clear who exactly it will affect. Also because CS systems must continue to operate until the integration is fully completed. The distrust felt by many employees will not abate for a long time.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
