Daily Management Review

What Transpired At Credit Suisse, And How Did The Situation Get So Bad?


What Transpired At Credit Suisse, And How Did The Situation Get So Bad?
A decline in its shares and bond prices, which heightened concerns about a potential global banking crisis, prompted Credit Suisse to announce it would borrow up to $54 billion from the Swiss central bank to boost liquidity. According to analysts, that might not be sufficient.
The 167-year-old Swiss lender is currently in a mess that can be attributed to a string of scandals over many years, changes in top management, multi-billion dollar losses, and a lackluster strategy.
Losses resulting from the failure of the investment funds Archegos and Greensill Capital in 2021 were what started the sell-off in Credit Suisse's stock.
In January 2022, only eight months after being hired to turn around the failing bank, Antonio Horta-Osorio resigned as chairman due to a COVID-19 rule violation.
Ulrich Koerner, the company's new CEO and a restructuring expert, unveiled a strategic review in July, but it was not well received by investors.
Customers ran away from the bank in the autumn after hearing an unfounded rumor about its impending failure.
When the bank reported its largest annual loss of 7.29 billion Swiss francs since the financial crisis, Credit Suisse confirmed last month that customers had withdrew 110 billion Swiss francs in the fourth quarter. Credit Suisse had asked investors for 4 billion Swiss francs in December.
The bank's largest backer, Saudi National Bank, told reporters on Wednesday that it was satisfied with the bank's turnaround plan but was unable to provide more funding due to regulatory restrictions.
Over the past year, the shares have decreased by 75%.
Although Credit Suisse has pledged to borrow up to $54 billion to support liquidity and investor confidence, some analysts doubt that will be sufficient to calm investors.
One way to support market confidence might be to win the support of strategic investors. Oyalan Group in Saudi Arabia and the Qatar Investment Authority are two of its investors.
GIC, a Singapore sovereign wealth fund, became an investor in UBS during the early stages of the global financial crisis in 2008, but GIC ultimately lost money as a result of the stake sell-down.
Given that Credit Suisse owns an asset management company and a stake in SIX Group, which operates the Zurich stock exchange, selling stakes in various assets is an option.
Credit Suisse has already announced plans to spin off its volatile investment banking business as part of a strategy to cater to wealthy clients.
The bank is one of the biggest wealth managers in the world and, more importantly, it is one of the 30 banks that are globally systemically important and whose failure would have an impact on the entire financial system.
A local Swiss bank, wealth management, investment banking, and asset management operations are all part of Credit Suisse. By the end of 2021, it will employ just over 50,000 people and have 1.6 trillion Swiss francs in assets under management.
Credit Suisse serves as the private bank for a large number of business owners, wealthy and ultra-wealthy individuals, and companies with more than 150 offices spread across about 50 nations.