The collision of ambition, greed and negligence reduced this once-respected bank to rubble, writes Thabiso Makekele
They say it takes 20 years to build a reputation and five minutes to ruin one.
For Credit Suisse, a Swiss bank in business for more than a century and a half, the unravelling was a slow burn, smouldering under years of mismanagement and scandal. What appeared to be collapse in less than a year was, in fact, the culmination of a decades-long saga.
The financial drama that unfolded in the heart of Zurich last year sent shockwaves through the global banking industry. As the 21st century dawned, Credit Suisse, a paragon of discreet Swiss banking, was riding high after acquiring four other banks, a controlling stake in a fifth, an asset management business, and adding an insurance company to its bouquet as a strategic partner in the ’90s. But its aggressive growth was also fuelled by shady, high-risk clients whose identities were jealously guarded.
Pseudonyms
By the early 2000s Credit Suisse boasted assets in billions and a global presence. But behind its gleaming façade, the cracks had begun to show.
The first appeared in 1986, when the bank was implicated in hiding billions stolen by Filipino dictator Ferdinand Marcos behind pseudonyms for himself and his wife, Imelda, to shield the funds from scrutiny.
Fast forward to 1999: authorities revoked the bank’s licence to trade in Japan after bankers destroyed evidence related to an investigation into concealed losses.
In 2000 the bank was investigated for accepting $214-million in ill-gotten gains linked to Nigerian military dictator Sani Abacha.
In 2004 one of its bankers was arrested for laundering billions for Japan’s largest Yakuza gang; in 2009 the bank was fined $536-million for circumventing US sanctions against Iran and Sudan. By 2011, it had paid €150-million to settle an investigation into German clients’ tax evasion.
Shortfalls in dealings
As the years rolled on, allegations continued to roll in, and the bank continued to pay huge settlements.
In 2014 Credit Suisse pleaded guilty to tax evasion charges in the US, agreeing to pay a $2.6-billion fine.
In 2016 the bank reached a €109.5-million settlement with Italian authorities over allegations it helped clients hide funds and dodge taxes. The same year, US regulators fined Credit Suisse $16.5-million for major shortcomings in its anti-money-laundering programme.
A year later it was fined $700,000 by Singapore’s financial regulator for breaching money-laundering rules in transactions linked to Malaysian investment fund 1MDB.
In 2018 Swiss regulators, after identifying shortfalls in its dealings with entities like Fifa, Petrobras, and PDVSA, ordered Credit Suisse to improve its anti-money-laundering controls. The same year former Credit Suisse banker Patrice Lescaudron was sentenced to five years in prison for forging client signatures to divert money and make unauthorised stock bets, leading to losses of more than $150-million.
Then in 2019 CEO Tidjane Thiam quit after acknowledging that his engagement of private detectives to spy on former Credit Suisse executives who had moved to rival bank UBS had “disturbed” Credit Suisse.
A year later Swiss prosecutors indicted Credit Suisse for failing to investigate the source of funds linked to a Bulgarian drug ring.
Kickbacks
One of the most egregious matters, dubbed the Tuna Scandal, tanked a country’s economy. Between 2012 and 2016 Credit Suisse lent $2-billion to three state-owned Mozambican companies to fund a tuna fishery and maritime security projects.
The Guardian reported that a Mozambican contractor “secretly arranged kickbacks worth at least $137-million, including $50-million for bankers at Credit Suisse meant to secure more favourable deals on the loans”. When the government debt incurred became public knowledge in 2016, after revelations of “hundreds of millions of dollars” being unaccounted for, the International Monetary Fund suspended aid to Mozambique. The metical collapsed in the ensuing financial turmoil, worsening the country’s debt burden and economic hardship.
The Financial Conduct Authority, an independent UK regulator, told the Guardian: “Credit Suisse employees took steps to deliberately conceal the kickbacks, while the bank itself failed to properly manage the risk of financial crime in its emerging markets business, despite having sufficient information to appreciate the likelihood of bribery related to the government projects.”
Credit Suisse agreed to a $475-million settlement in 2021 for violating anti-bribery and money-laundering laws, while Mozambique reached a separate out-of-court settlement with UBS, Credit Suisse’s new owner, in 2023. The details of the settlement remain undisclosed.
Tipping point
The collapse of Archegos Capital Management in 2021 signalled the beginning of the end. Federal prosecutors said Archegos, run by Korean-born American Bill Hwang, who was later indicted for fraud and racketeering, used Credit Suisse as an “instrument of market manipulation and fraud” to inflate the value of its portfolio from $1.5-billion to $35-billion. Credit Suisse, having extended billions in credit to Archegos, found itself facing a staggering $5.5-billion loss when the capital management firm imploded.
Shortly after Archegos crashed, Greensill Capital followed suit, exposing Credit Suisse clients to another $3-billion in losses and forcing the bank to suspend $10-billion in investor funds. The fallout was immediate and devastating, and the tipping point for Credit Suisse.
In 2022, with the once-mighty bank’s reputation in tatters, chairman António Horta-Osório resigned after showing his personal aversion to sticking to the rules: he was publicly outed for breaking covid quarantine rules to attend sports matches in the UK.
Desperate bid
On March 10 last year, half a world away in California, Silicon Valley Bank collapsed. It was technically bankrupt after being forced to liquidate fixed-income securities at depressed values. Previously, with $209-billion in assets, it was one of the US’s 20 biggest banks.
Two days later Signature Bank, also in the US, was shuttered after a run on the bank, and three days after that Credit Suisse investors followed suit after its biggest shareholder, Saudi National Bank, refused to provide additional support. The drain on cash deposits knocked Credit Suisse’s share price into freefall. Credit Suisse shares – $80 apiece at their peak – plunged to less than $5 a share. By the end of March 2023, the deposit outflow had halved Credit Suisse’s deposit base, compared with its level nine months earlier.
When it became clear that a central bank bail-out would not be enough to rescue Credit Suisse, Swiss authorities, in a desperate bid to save the Swiss banking system, arranged for former rival UBS to buy Credit Suisse for ₣3-billion. Credit Suisse’s assets were at the time valued at more than ₣100-billion ($1,1-trillion).
The deal was seen as the only way to prevent a collapse likely to have had a domino effect on the global banking system. Credit Suisse was the 45th-largest bank in the world, and one of 30 regarded as systemically important globally.
While the move appeared to assuage global markets, it raised serious concerns about job losses, domestic banking competition, and power concentration in the banking sector. It also cost Credit Suisse bondholders ₣16-billion as the Swiss regulators overrode the principle of debt repayment as a priority over shareholder repayment. Central banks in the UK and Europe moved quickly to reassure investors that the move would not set a precedent for their jurisdictions.
A University of Zurich study estimates that the Credit Suisse collapse led to more than 10,000 job losses in various sectors in Switzerland.
Culture of fear
The events at Archegos and Greensill were symptoms of a deeper malaise at Credit Suisse. They finally laid bare its culture of risk-taking, as well as its inability to learn from its mistakes.
Interviews with former staff revealed a culture of fear in which the pressure to perform overshadowed ethical considerations. The toll on mental health and morale was significant, and many felt betrayed by the institution.
Responding to allegations by the Organized Crime and Corruption Reporting Project that Credit Suisse was “lenient in accepting money of dubious origin through politicians in developing economies who sought to take advantage of Swiss secrecy laws”, the bank said some of the accounts under scrutiny had been opened in the 1940s, when laws, practices, and expectations of financial institutions were very different, and that “90% of the accounts to which the project referred had been closed or were in the process of being closed”.
Credit Suisse announced a sweeping plan to refocus its activities on banking for the wealthy. But it was too little, too late. Trust had evaporated, and clients fled.
The warning signs were in plain sight. The bank’s ability to navigate through decades of controversy created a false sense of invincibility.
It’s a reminder that “too big to fail” is a dangerous illusion, and underscores the importance of ethical leadership, robust governance, and vigilant regulatory oversight.