Subtitle: Scandal, Sleaze and the Collapse of Credit Suisse.
I recently finished listening to the audio version of this book. It describes the history of one of the largest Swiss banks Credit Suisse from it’s founding in 1856 up to it’s collapse/takeover by UBS in 2023, with a focus on the various scandals it was involved in. It’s a remarkable story and I also learnt a few general facts about Swiss history.
One of the founders of Credit Suisse was the politician and businessman Alfred Escher. He was involved with many Swiss companies and institutions, which are still household names today, such as the Swiss Federal Institute of Technology (ETH) and the Gotthard Railway.
Switzerland is known for its banking secrecy, which according to the book, started in the early 20th century and was strengthened in the early 1930’s when the government turned to the bankers to update banking regulations. Following crackdowns on potential tax havens after the Great Financial Crisis of 2007 - 2009, Swiss banking secrecy has been weakened.
Credit Suisse was involved in so many scandals over it’s lifetime, many of which have interesting names such as the Tuna Bond scandal and the Spygate scandal. Of course it’s also well known that many Swiss banks, Credit Suisse among them, laundered money for the Nazis during the war. In addition, they also refused to give funds back to surviving members of Jewish families, who had lodged money with the banks in neutral Switzerland before the war. During investigations into these matters during the 1990’s, apparently Swiss banks actively destroyed documents to hide what they’d done during the war.
I found it interesting that Credit Suisse was victim of one of the first “digital banks runs”. In November 2022 a tweet circulated that a large international bank was in danger of collapse. Somehow Credit Suisse became the prime suspect, the posts went viral and customers all over the world started pulling their money out of the bank. With today’s technology it only takes a few seconds to transfer money. The bank was bleeding billions within just days!
The crisis continued into the beginning of 2023 and when in mid-March the bank’s largest investor, the Saudi National Bank, said that it could not provide further financial assistance, the run on the bank intensified. Even a loan from the Swiss National Bank (SNB) did not give the customers confidence and the run continued. Behind the scenes the Swiss government together with the SNB and FINMA (the Swiss financial authority) brokered a deal with Credit Suisse’s big Swiss rival UBS to acquire Credit Suisse, rather than let the bank collapse.
It remains to be seen what the medium to long-term effects of the merger will be, for example the reduction of banking competition in Switzerland’s economy and the concentration of a huge amount of power in an enormous bank.