Two numbers help to understand the fall of Credit Suisse: in 2007 the Swiss bank was the eighth largest publicly traded institution in the world by market capitalization. But, when its shares dropped 31% yesterday morning, before partially recovering in the afternoon (-24.24% at the close), the bank has plunged to 155th place, with a market capitalization of around 7 billion Swiss francs, approximately 7.15 billion euros. It means that Credit Suisse has wiped out something like 100 billion francs of capitalization in the last 15 years. At current valuations, it’s like losing a whole Goldman Sachs, calculate the Financial Times.
To stop the collapse and the risk of insolvency, signaled by the vertiginous increase in derivatives (Credit default swaps) to insure the riskiest investments, which have risen to a record thousand points (18 times the one-year CDS of UBS), Credit Suisse has appealed to the Swiss central bank. And in the evening, the Swiss National Bank and regulator Finma said that Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks and that the SNB will provide the bank with liquidity if needed. But there are those who are already hypothesizing a stew, with the separate sale of healthy assets: the Swiss Bank, the Wealth Management division and part of the investment banking division, which could be individually listed on the stock exchange.
167 years of history
It would be the end of the institute founded in 1856 by Alfred Escher in Zurich. But in its 167-year history, Credit Suisse has often been at the center of scandals and crises: dto the gold trade with Nazi Germany and trade relations with the Reich to the dangerous liaisons with Greensill and Archegos Capital, which failed in 2021up to the accusation of money laundering, with the discovery of 18,000 secret accounts, including those in the name of criminals, wanted torturers and tax evaders, revealed byinternational journalistic inquiry «Suisse Secrets» in February 2022.
Let’s focus on the last two years. After the Suisse Secrets media scandal, Credit Suisse was in June convicted of failing to prevent money laundering by a Bulgarian gang of cocaine traffickers.
In March 2022 a Bermuda court ruled that former Georgian Prime Minister Bidzina Ivanishvili and her family are entitled to over half a billion dollars in compensation by the local life insurance arm of Credit Suisse, after a former adviser to the bank (Pascale Lescaudron) was sentenced by a Swiss court in 2018 for forging the signatures of former clients, including Ivanishvili, for 8 years.
Last October the bank agreed to pay $475 million to US and UK regulators, after pleading guilty to defrauding investors for an 850 million dollar loan to Mozambique to finance a fleet of tuna fishing vessels. But around 200 million have gone in bribes to Cs bankers and Mozambican government officials. In Mozambique, Credit Suisse also arranged a secret loan to the IMF which withdrew its support for the country, when it admitted that it had received 1.4 billion undeclared.
Il family office Usa
But the big trouble happened a year ago. In March 2021, Credit Suisse lost $5.5 billion with the default of US family office Archegos Capital Management. Also in March 2021, following the collapse of Greensill Capital, Credit Suisse was forced to freeze $10 billion of funds. The Swiss bank had sold billions of Greensill debt to investors, assuring that the high-yield securities were low-risk because the underlying credit exposure was fully insured. After the lawsuits, Credit Suisse has returned about $6.8 billion to investors so far.
Greensill and Archegos resulted in a loss of 5.9 billion francs in the 2022 budget. Credit Suisse was forced to launch a tough reorganization plan and a capital increase of 4 billion francs, which changed the shareholding structure, making the Arabs the first shareholders. According to the bank’s website, now the Saudi National Bank has 9.88%; Qatar Holding 5.03%; asset manager Olayan Group 4.93% and BlackRock 4.07%. It was the no of the first Saudi shareholder to the new capital increase that caused the share of Credit Suisse to sink, which in the last 6 months has lost almost 65% on the Zurich stock exchange (over 35% in the last 5 days after the crash of Silicon Valley Bank).
Not just finance
However, Credit Suisse has not only been involved in financial scandals. Former CEO, Tidjane Thiam, had been forced out of office in March 2020: an investigation had revealed that the bank had hired private detectives to spy on former wealth management head Iqbal Kahnfollowing his move to rival UBS. Antonio Horta-Osorio, on the other hand, had resigned as president of Credit Suisse in January 2022after less than a year at the top of the institute: he had violated the anti-Covid quarantine rules to attend the final of the European football championship at Wimbledon (won by Italy).