Bankruptcies, Spies, Tuna The scandals that ruined Credit Suisse

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After 166 years, the history of the Zurich financial institution as an independent company comes to an end: The stumbling Credit Suisse is being taken over by its arch-rival. The once highly respected bank had been stumbling from one scandal to the next for years. Most recently, clients fled in droves, taking their money with them.

It was just ten years ago, and yet it appears to have been a different era for Credit Suisse: At the beginning of the last decade, the major Swiss bank was named the world’s best private client bank three times in a row. Compared to many of its competitors, the long-established Zurich-based bank had weathered the global financial crisis relatively well and was regarded as the partner par excellence to which the rich and super-rich worldwide entrusted their assets. After a whole series of scandals, not much is left of this prestige, the trust of customers and, in some cases, their money. To forestall the collapse, archrival UBS is taking over Credit Suisse in a state-backed deal.

Spygate

Bank CEO Tidjane Thiam and the ambitious rising star of Credit Suisse’s asset management, Iqbal Khan, are gradually coming more and more into conflict. Spectacular and amusing to the public is their neighborhood dispute over the million-dollar villas on Lake Geneva. Among other things, it’s about construction site noise and trees that obstruct the view of the lake. At a 2019 New Year’s reception, the dispute escalates openly, and the wives are also said to be involved. Eventually, the frustrated Khan leaves Credit Suisse for archrival UBS. Worried that the manager could take business secrets, customers and, above all, talented employees with him to the competition, Credit Suisse has Khan shadowed by private detectives. But the detectives are so unprofessional that the banker under surveillance notices his pursuers and confronts them directly. A scuffle ensues, the police are called in, and the whole thing blows up. Bank CEO Thiam denies having ordered the illegal tailing or having known about it. However, the episode, including the subsequent lawsuits, causes deep cracks in the bank’s respectable facade.

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However, as it turned out in the following years, criminal business had been going on behind the scenes for a long time. In 2020, it came to light that Bulgarian drug smugglers had been laundering their money at Credit Suisse for years. Both the bank and a responsible employee were later convicted. The almost complete absence or non-observance of anti-money laundering measures in the case, which is said to have lasted from at least 2004 to 2007, caused a stir.

Greensill bankruptcy

The collapse of the British finance firm Greensill Capital 2021 was a scandal in itself. For Credit Suisse, however, the bankruptcy of the supply chain financier became a fiasco of its own. Employees of the bank had virtually pushed billions in Greensill bonds on their wealthy clients without informing them of the associated risks.

Archegos collapse

Also in 2021, the implosion of the hedge fund Archegos shocked the financial market worldwide. Fund owner Bill Hwang had speculated in an extremely risky manner with a high degree of indebtedness, thus building up assets of 36 billion dollars at times. Due to price fluctuations on the stock exchange, however, the house of cards collapsed within a very short time. It turned out that no major bank had supported Hwang in his financial juggling like Credit Suisse. The bank was left with losses of more than five billion dollars. An independent investigation confirmed a fundamental failure in risk management and the corresponding control mechanisms of the investment banking division.

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Tuna Bonds

Credit Suisse collected more than a billion dollars from investors between 2012 and 2016 for bonds that the desperately poor Mozambique allegedly wanted to use to build a tuna fishing fleet. However, a significant portion of the money never arrived in Mozambique. Around 50 million flowed into the pockets of Credit Suisse employees. The scandal drove Mozambique into a deep financial crisis. Bond investors lost hundreds of millions of dollars. The tuna bonds also eventually cost Credit Suisse hundreds of millions of dollars in damages and penalties.

Suisse Secrets

Under the name Suisse Secrets, the “Süddeutsche Zeitung” newspaper last year revealed information from a data leak containing information on tens of thousands of Credit Suisse clients, including known criminals, dictators and tax fugitives. The reports caused outrage around the world.

In addition to homegrown scandals, Credit Suisse, like all banks, is struggling with the consequences of global crises, particularly the war in Ukraine. Sanctions against Russian super-rich also affect Credit Suisse clients. However, the biggest challenge for the bank is to regain the trust of its clients. The prerequisite for this would be an end to the series of scandals and thus a consistent change of course at the bank. Despite all the assurances of the management team, which has been replaced several times in recent years, this is not in sight. The admission of inadequate financial reports for the past two years is the most recent example.

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Salih Demir

Salih Demir lives in Germany. He is interested in politics and economy. Germany editor of -ancient idea- fikrikadim.com

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