If it says Switzerland and we think, by association of ideas, of a perfectly regulated "Country System", in which everything works in a manner consistent with its inspiring principles of safety and solidity. Unfortunately, the dramatic story of Credit Suisse (Cs), rigorously reconstructed in the pages of book by Mathilde Farine, a Swiss journalist specializing in the economic-financial field, shows unequivocally that, even for our neighbors across the Alps, the numerous flaws and critical issues found require a systemic and programmatic rethinking of their financial world. He is convinced of it too Stefano Righi, economic journalist, expert in the world of banking and insurance, who, in addition to editing the Italian version of the book, has written some interesting considerations in this regard, included in his Preface.
The fall – The Credit Suisse case
The eleven agile chapters, to which must be added a Prologue and a Conclusion, in which this volume is divided and the captivating style make it a decidedly inviting read, also for a much wider audience than those who are professionally interested in the financial world. In the book, then, in addition to a bibliography, useful for further specific insights, some pages are dedicated both to an Essential Chronology of the history of Cs and to "The key men of Credit Suisse”, in which the profiles of significant characters in its centuries-old history are briefly outlined.
By leafing through the pages, the reader will therefore be able to retrace the fundamental stages of this bank: from its foundation in 1856, to the tragic epilogue, which occurred during a weekend in March last year and, in any case, just in time, before the opening of the Asian markets, with its incorporation into the other systemic bank of the Confederation, the Union des Banques Suisses (Ubs).
The industrialization of Switzerland and the internationalization of its banks
A meritorious aspect of this reconstruction is that it has been placed in the broader context of the two progressive processes industrialization of Switzerland and internationalization of its banking system.
If for the first of the two phenomena, industrialisation, the results seem to have been decidedly positive, the same cannot really be said for the profile of internationalisation. In fact, the numerous difficulties and misadventures that many Swiss banks, including the most important ones and not just Cs, have encountered on several occasions on this front are well documented: starting with ubs, which, after an acute crisis in 2008 following the bankruptcy of Lehman Brothers, paradoxically, will find itself saving its main competitor from irreversible disaster, the same one that, ironically, fifteen years earlier, had been one step away from acquiring it .
The relevant ones must be placed at the origin of these negativities inadequacies highlighted both in growth strategies of the most important banks, excessively oriented towards investment banking, both in risk management, as demonstrated by its involvement in some sensational failures, the latest being those of Greensil and Archegos; and, finally, in the regulatory and sanctioning tools available to the Central Bank and the Swiss Supervisory Authority.
The causes of the Credit Suisse crisis
Moving from the overall picture to the specific Credit Suisse story, the Author points her accusing finger at the effects of its expansion into the US market, culminating in the entry into the capital of First Boston. An expansion, in his opinion, guilty of having brought about a dangerous situation flattening of the managerial culture of Credit Suisse, monopolized by the exclusive search for profits for the bank and substantial ones bonuses for its managers, to the detriment of prudent and rigorous risk management. This was then accompanied by a deplorable superficiality in the selection of the managerial class established in the meantime and a serious lack of incisive training interventions.
Another painful chapter on which Farine insists is that of the evident shortcomings in the interventions (which, however, have occurred) of theSupervisory authorities, despite the numerous financial scandals in which Credit Suisse was involved: from the so-called Chiasso case of 1977, to that of having favored tax evasion by numerous US citizens, contested by the tax authorities of that country in 2014, to the other of the Tuna Bonds of Mozambique in 2016, just to name a few from a much longer list.
What lessons can be drawn from the Credit Suisse affair
As happens in cases of this kind, in which the size of the institution in difficulty causes concern for the possible emergence of systemic risks, we ask ourselves what lessons can be learned from the Credit Suisse affair.
The answer, whose validity is certainly not limited to Switzerland alone, is to provide financial institutions with a governance capable of imparting corporate managerial culture, attentive to innovation, but supported and characterized by a prudent risk management.
As for the Supervisory Authorities, it is certainly no coincidence that, as happened in the Confederation itself, they took this specific opportunity of the last-minute rescue of Credit Suisse to insistently ask for a strengthening its powers of intervention and sanction.
Mathilde Farine “The fall – The Credit Suisse case”, Milan 2024, Guerini E Associati, pages 152, Euro 16,50
