credit suisse

What’s going on at Credit Suisse?

Spying scandals, huge loses, bad investments and top-tier resignations mark a bizarre year for the investment bank

Credit Suisse’s strange year began a little bit later than everyone else’s. It started in February when its then chief executive officer, Tidjane Thiam was ousted in the wake of a spying scandal. After his appointment in 2015, the company’s stock increased by 7.5% and, by 2019, Thiam had increased pre-tax profit from €2.5 billion in 2015 to €4.4 billion in 2019. But, winning streaks don’t last forever, and Thiam resigned on 7 February after Iqbal Khan, Credit Suisse’s former head of wealth management, accused Thiam of ordering surveillance on him.

An inquiry by Homburger ultimately found Credit Suisse COO Pierre-Olivier Bouée to be to blame, along with the former head of security, exonerating Thiam. Despite his name being cleared, Thiam chose to resign amid a reported ‘power struggle’ within the company. “I had no knowledge of the observation of two former colleagues. It undoubtedly disturbed Credit Suisse and caused anxiety and hurt. I regret that this happened and it should never have taken place,” Thiam later said.

Thiam’s resignation came just as banks worldwide suffered a lockdown-induced slump. Universally, share prices took a dip, with Credit Suisse watching its shares more than halve through March, eventually settling at just 55% of its March 2015 stock price.

Pandemics and top-tier resignations were just the beginning of the Swiss bank’s troubles. This week it was announced it would lose $450 million after York Capital Management, in which it owns a stake, declared it was winding down European operations. According to the FT, York – which is one of the hedge fund industry’s oldest companies – has suffered lacklustre returns and a fall in assets, making it just one of many high-profile hedge funds to cut back on its spending in a move than will cut off around $3 billion worth of funds. In 2010, Credit Suisse paid $425 million for a 30% stake in the business. Today it will struggle to recover that money, and money lent to York’s clients.

York’s assets reportedly make up less than 1% of the $477 billion of assets in Credit Suisse’s investment division but half a billion dollars is not small fry in anybody’s books and, after a worrying year, it surely has not put Credit Suisse investors or executives – including new CEO Thomas Gottstein – at ease.

tidjane thiam
Tidjane Thiam. Image: World Economic Forum

Headquartered in Zürich, Credit Suisse is one of just nine global ‘Bulge Bracket’ banks, meaning it provides services in private banking, shared services and asset management, alongside investment banking. According to its own data, as of 2019, its total assets measured an eye-watering $787.395 billion.

It’s surely a fortune that its founder, Alfred Escher, could not have dreamed of when he founded the bank in Switzerland in 1856, issuing loans to help develop Switzerland’s electrical grid and railway system. For his work campaigning for privatisation of the railways, Escher was dubbed “the spiritual father of the railway law of 1852”.

In the century and a half since, few titles of equal renown have been won by the bank or its employees, but it has established itself as one of the world’s leading financial institutions, even weathering the 2008 financial crisis better than many of its competitors. In a piece titled ‘Credit Suisse’s Secret Deals’, The Wall Street Journal noted that the bank had given Iran and other “rogue players” access to US dollars during this time.

Further controversy followed in the 2010s when four Credit Suisse employees were accused of fraud by the US Justice Department for helping customers avoid tax. In February 2014 it paid $197 million in fines as one of 14 Swiss banks under investigation in the US. A separate German investigation in 2013 also looked into tax evasion, with Credit Suisse eventually stumping up a €150 million settlement.

In May 2014, it pleased guilty to conspiring to aid tax evasion, making it the largest bank to plead guilty in the US since 2014. “This case shows that no financial institution, no matter its size or global reach, is above the law,” said Attorney General Eric H. Holder. The bank was slapped with a $2.6 billion penalty, but saw shares rise 1% the same day. Shareholders, apparently, had more faith in the bank than the law.

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