Credit Suisse: cracks in Swiss self-confidence – economy

Credit Suisse: cracks in Swiss self-confidence – economy

At least two days have etched themselves into the collective memory of the Swiss: October 2, 2001, when the national airline Swissair was grounded, and October 16, 2008, when the Switzerland saved her major bank UBS from insolvency. In both cases, it was icons of the Swiss economy who were at the end. This touched on Switzerland’s self-image as a powerful economic nation despite its small size.

Now it looks like the next trauma is waiting for the Swiss population: in just two weeks the second major Swiss bank, CreditSuisse, gone from a badly battered bank to a practically hopeless case. As several media reported unanimously over the weekend, the Swiss authorities urged UBS to take over their rival.

Credit Suisse, more steeped in history than that UBS, also a pioneer of industrialization and the midwife of numerous powerful companies in Switzerland, should therefore be history in its previous form. Or like the Zurich finance portal Inside parade ground formulated: “Switzerland is experiencing its Grounding 2.0. Like Swissair, an icon disappears overnight.” What does that mean for the country – apart from another crack in economic self-confidence?

The image of the entire financial center will almost certainly be damaged. It was already suffering from the Credit Suisse scandals, which revealed that the bank, in addition to legacy issues from the days of banking secrecy, still has massive problems in terms of compliance and risk assessment.

From today’s perspective, the Swiss financial market supervisory authority Finma is also not doing well, after all it has been clear for some time that something is going wrong at the bank. Proceedings for corruption, money laundering, even for spying on its own employees: Finma, which cannot impose fines, has repeatedly reprimanded and drawn up new rules for the bank. But she was apparently unable to change anything about the problematic business culture of Credit Suisse. But who, if not the supervisor, should stop such misconduct?

Thoroughness, reliability and solidity are part of Switzerland’s reputation. The Credit Suisse scandal suggests that the key financial market players, i.e. not only Finma but also the National Bank and the Ministry of Finance, lacked all these qualities. It is questionable whether, under these circumstances, the world’s wealthy will continue to turn to Swiss banks in the future.

The consequences of the decline will also be drastic for the almost 50,000 employees of Credit Suisse. UBS, which itself employs a good 74,000 people, is unlikely to take over all of its rival’s staff in the event of a merger, also because the business areas of the two banks overlap. Credit Suisse has around 17,000 employees in Switzerland. As the Reuters agency reports, citing insiders, a merger in Switzerland could eliminate 10,000 jobs.

In addition to the job cuts, the Swiss public is also likely to be interested in how much the reeling bank will succeed in ultimately burdening the general public with the costs of its years of mismanagement. From the talks over the weekend, it emerged that UBS would like government guarantees worth billions in the event that the currently well-positioned UBS incurs costs from legacy issues at Credit Suisse. What is understandable in principle – after all, UBS would then have to take responsibility for things for which it was not responsible – would in fact be the allocation of the losses from the entire affair to the population. For comparison: Credit Suisse managers have pocketed CHF 32 billion in bonuses over the past ten years. Again Tages-Anzeiger calculatedthe bank wrote a loss of CHF 3.2 billion in the same period.

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