Credit Suisse Crash: 'Switzerland Is Not As Market Oriented As You May Think'

(MENAFN- Swissinfo) Deutsch (de) "Die ökonomische Bedeutung des Finanzplatzes wird überschätzt" (original)
  • Português (pt) "O Estado provavelmente também terá que estabilizar esse novo banco"
  • Français (fr) ((L'État devra probablement stabiliser aussi cette nouvelle banque))
  • Pусский (ru) ((Вклад банков в процветание Швейцарии сильно переоценивают))
  • 日本語 (ja) スイス金融業界がスイス経済に落とした影
  • (uk) ((Внесок банків у процвітання Швейцарії набагато перебільшують))

    Swiss Review: Tobias Straumann, does the loss of Credit Suisse with its long history mark a tipping or turning point for Switzerland?

    Tobias Straumann: Well, it is certainly a milestone. Credit Suisse was Switzerland's oldest big bank still in existence. But its demise is not a huge turning point as such. Big banks were already failing back in the 1990s. Switzerland had five big banks around 30 years ago. Now there is one. The 2008 global financial crisis and ensuing government bailout of Switzerland's biggest bank UBS were of much greater significance. So was the end of banking secrecy for foreign clients.

    Swiss Review: From rescuing UBS to forcing it to acquire Credit Suisse, the state has had to bail out Swiss big banks twice in the last 15 years – in a country that prides itself on its free-market principles. How does that make sense?

    T.S.: Switzerland is not as market oriented as you may think. This country has many state-owned or pseudo state-owned enterprises. You have the cantonal banks for a start – these are also public-sector entities. Moreover, in my view government bailouts of big banks are no longer as shocking as they used to be. Since the 1990s, the vulnerabilities of the highly globalised and liberalised banking system have been in evidence all over the world.

    Tobias Straumann is Professor of Economic History at the Universities of Zurich and Basel. © Keystone / Marcel Bieri

    Repeated state intervention has become the norm. Indeed, there is no other option, because the alternative would be global financial meltdown. Other countries do not want Switzerland to be a source of contagion for the entire banking system.

    Swiss Review: But after the UBS bailout, parliament's too-big-to-fail law was meant to prevent the government and taxpayers from having to take so much financial risk again. Is the fall of Credit Suisse a rude awakening for lawmakers?

    T.S.: As a historian, I am not too surprised about what happened. In a crisis, you need the mechanisms to be very simple. Not only was the too-big-to-fail law too complicated, it was also untested and a little naive. You have to remember that foreign authorities are always involved and have their own responses. It can take a while before they all agree.

    Swiss Review: What can Bern still do, if anything, in the face of the global financial markets?

    T.S.: I would say that Bern can – and must – still do a lot to keep the banking sector on an even keel. It did a good job with UBS in 2008. The bank was partially nationalised for a time, while the federal government even ended up earning something from the deal. UBS also overhauled its risk culture. In the case of Credit Suisse, Bern believed a merger was the safer option. Time will tell whether it was the right one.

    Swiss Review: Who or what was primarily responsible for the collapse of Credit Suisse?

    T.S.: The management and the board of directors. Credit Suisse had been poorly run for years. But the authorities must also take a good look at themselves. They had known since October 2022 that the bank was in difficulty, yet it still took a long time in March to put together a rescue plan. It all seemed a bit off the cuff, unlike the bailout of UBS. This surprised me.

    The two brand logos of the banks UBS and Credit Suisse: UBS formally completed its acquisition of Credit Suisse in June 2023. © Keystone / Ennio Leanza

    We still don't know enough to pass verdict. A parliamentary inquiry committee has been set up to look into the takeover. However, the bank itself still has a part to play. It should be proactive in producing a comprehensive report on what went wrong at Credit Suisse. It owes Switzerland that much.

    Swiss Review: Despite losses and scandals, Credit Suisse paid exorbitant salaries and bonuses. Some bankers only seem to be driven by greed and are ready to risk everything in their pursuit of money. What happened to the entrepreneurial bank of yesteryear that helped to develop the country's economy?

    T.S.: Credit Suisse kept supporting business until the very end, doing a very good job with its corporate lending. It is true that founding father Alfred Escher and his peers invested in infrastructure in the 19th century, but the railways were also a risky business. The early years at Schweizerische Kreditanstalt were turbulent, with railway stock prices going up and down. Bankers earned handsomely when things went well, but their bonuses vanished into thin air when stocks plummeted. That is the difference from today. Credit Suisse did make mistakes because of greed, but the bank's demise was mainly down to the incompetence of the board of directors and management.

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