“Credit Suisse does not have a regulation problem, it has a trust problem”

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Ever since Finance Minister Karin Keller-Sutter (59) announced on Sunday evening that UBS and Credit Suisse were forced into marriage, many have asked themselves the question: What exactly went wrong? Finally, strict regulations were introduced following the bankruptcy of UBS during the financial crisis in 2008, aimed at preventing the state from having to bail out a major bank again.

“It’s not a general regulatory issue, it’s a trust issue,” says Martin Nerlinger, 31, a professor of finance at the University of St. Gallen (HSG). The regulation would work. In any case, they do not work.

Credit Suisse lost the trust of its customers at the latest last week. “We’ve never seen a loss of confidence on this scale,” says Nerlinger. It was very fast in the end.

CS could communicate better

“Actually, the loss of confidence started last October,” Nerlinger says. Investors and customers did not believe in CS’ new strategy.

Panic erupted when the Saudi National Bank announced last week that it would not provide additional funding to Credit Suisse. «CS has had problems within the organization for some time now. There were too many problematic factors in the last week,” says Nerlinger. It was the beginning of the end as customers were withdrawing their money in piles. Foreign banks also did not want to work with CS anymore.

Could CS have prevented the fall? Even the HSG professor cannot answer this question. But he is confident: “If CS had proactively resolved issues with everyone involved since October, far fewer problematic questions would have arisen in the last few days of its existence.”

Overall, CS has a transparency and communication problem, according to Nerlinger. “It has something to do with the previous round,” he says. A credible, long-term strategy was missing.

It’s now up to the new UBS to build trust in the new monster bank. Skepticism is still high right now. “People need to get to know the new UBS first,” says the professor. After all, UBS has taken a leap of faith with its development since the 2008 financial crisis.

Swiss financial center must become credible again

There are also doubts about the Swiss financial center. Both for Swiss citizens and for international investors. “We must address neglected issues together with UBS,” he said.

Nerlinger is confident that Switzerland can restore its reputation. “With the right strategy, Swiss banks can regain their compatriots and abroad,” he says. The new UBS could even lead the way in future issues such as sustainable, value-creating banking.

Source :Blick