Cocaine, yakuza, corruption in Africa, espionage, tax evasion, or a plucked prime minister. So many subjects that are not, traditionally, associated with a bank. Yet each of them corresponds to one of the scandals that has accompanied Credit Suisse's slow descent into hell in recent years.
These are also incredible cases that make it possible to understand why the Swiss central bank had to release urgently, Wednesday, March 15, a credit line of $ 50 billion for Credit Suisse. And most importantly, how the problems first faced by ultra-specialized US regional tech banks like Silicon Valley Bank (SVB) have spread to one of the major institutions of the global banking system.
Because SVB and Silvergate Bank are not playing in the same league as Credit Suisse. The two US banks succumbed because their activities were too focused on a single area: Silicon Valley start-ups for the first and cryptocurrencies for the second. They did not have a plan B when these two sectors began to suffer economically. "Credit Suisse is a much more diversified bank with clients from very different backgrounds," said Alexandre Baradez, financial analyst at IG France.
But these three institutions have all been caught in the same trap. "There is a liquidity crisis that affects all banks. That is to say, they have to deal with a growing number of withdrawal requests and struggle to satisfy them all," explains Alexandre Baradez. They certainly have the necessary funds, but they are invested in long-term assets. To have the money right away, they would have to sell them, "which they refuse to do because it would risk being interpreted as a sign of poor financial health by investors," says Alexandre Baradez.
Hence the interest of the $50 billion released for Credit Suisse. "For any bank this would have been more than enough to allow it to cope with withdrawals. But in the case of Credit Suisse, that remains to be seen," Baradez said.
Because if it is this pillar of Swiss finance is the first affected in Europe, "it is because the crisis of confidence seems to be particularly acute," says this specialist. The fault lies in years of errors and scandals that the managers of this bank modestly blame on a "poorly managed risk culture".
Dictators and mafiosi
The history of the shady affairs in which this "venerable" institution founded in 1856 played the leading roles goes back a long way. Already in the late 1980s, Credit Suisse was accused of being the bank that helped Philippine dictator Ferdinand Marcos hide his fortune. In 1995, a court in Zurich ordered Credit Suisse to return 500 million to the despoiled Filipinos, recalls the Guardian.
The bank also housed money embezzled in Nigeria by dictator Sani Abacha during his reign in the 1990s. And when it wasn't helping autocrats, Credit Suisse colluded with other "bad boys," like the yakuza. One of his bankers helped the Japanese mafia launder about five billion yen at the time (38 million euros at the 2004 exchange rate), but he was acquitted in Japan on the grounds that he was not aware of the origin of the funds.
From the beginning of the twenty-first century to the second half of the 2010s, Credit Suisse went from one tax evasion scandal to another, whether in Italy, Germany or the United States. The US court even sentenced the bank to a record fine of $ 2.6 billion in 2014 for inciting thousands of wealthy taxpayers to hide their wealth in Switzerland.
Some of his most prominent clients have also complained about the treatment meted out to them. This is the case of former Georgian Prime Minister Bidzina Ivanishvili, who accused the bank of squandering his money in 2018. Credit Suisse claimed that it was all the fault of one of its bankers, accused of falsifying the signature of the statesman to make stock market bets with his funds. The banker committed suicide in 2020, and a Bermuda court ordered the bank two years later to pay more than $500 million to Bidzina Ivanishvili.
But the worst was yet to come: between 2019 and 2022, Credit Suisse experienced "the worst years in its history," says the Financial Times. It has lost two CEOs, swept up in extravagant business. The first, Tidjiane Thiam, had to resign in 2020 after a scandal of spying on several employees of the bank. Then it's António Horta-Osório, a famous Portuguese banker, called to the rescue to turn around Credit Suisse and who had to throw in the towel in 2022 to have... repeatedly violated health rules relating to containment during the Covid-19 pandemic.
Meanwhile, the bank was accused in 2020 of failing to comply with its verification obligations and, as a result, financing a Bulgarian drug cartel. Two years later, Credit Suisse became the first bank to be criminally prosecuted in Switzerland in connection with this case.
Crazy sums lost in one year
But above all, it has lost crazy amounts of money in 2021. It bet nearly $10 billion in Greensill Capital, a British investment fund, which went bankrupt in 2021 and lost $5.5 billion in the high-profile collapse the same year of Archegos, an obscure hedge fund.
Read also on France 24: Archegos: how an obscure hedge fund made Wall Street tremble
A succession of missteps and scandals "that has shaken the reputation of the bank and pushed some wealthy clients to leave," says the Financial Times. For several months, the Board of Directors has been engaged in a vast mea culpa campaign assuring that the priority was to "change the culture" of the bank. Those in charge asked for only one thing: to give them time, because turning the ugly duckling of the banking sector into a swan cannot be done overnight.
And this is precisely what Credit Suisse no longer has since the fall of SVB accelerated everything... Starting with the exodus of customers. The European authorities may repeat that the European banking system is stronger than in the United States, "which is true, especially thanks to the regulations put in place after the 2008 crisis, but if Credit Suisse were to fall, there would inevitably be other victims," admits Alexandre Baradez. And the financial markets seem determined to punish Credit Suisse despite the Swiss bailout: on Friday, its stock market share closed down 8.01%.
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