There Once Was a Bank Called Credit Suisse
March 18, 2023, 2022 (EIRNS)—On March 17 Friday evening, the Financial Times reported that top-level talks between Union Bank of Switzerland (UBS) and failing Credit Suisse (CS) were underway over this weekend—under pressure from Bern and the country’s Swiss National Bank (SNB). The authorities reportedly urged the heads of the two major Swiss banks “to agree on a simple and straightforward solution before markets open on Monday,” March 20, the FT wrote, by which they meant a takeover of CS by UBS.
The Swiss financial blog “Inside Paradeplatz” (in German) wrote that the run on deposits at Credit Suisse had continued despite the $54 billion injection this week by the SNB. They explained:
“CS has existed for 167 years and was the pride of Zurich. Due to the internal takeover of the American investment bankers, the headquarters on Paradeplatz [in central Zurich] lost control.
“The bosses at corporate headquarters left the profits in private and retail banking to Wall Street dealers for their risky bets. In return, the ‘bosses’ in Switzerland received lavish bonuses. Now thousands of employees, many of them long-serving and over 50, are paying the price. After a takeover by UBS, they could no longer find a place in the enlarged bank.”
It is not clear whether there will be a complete or a partial takeover—or perhaps no deal at all. A complete takeover is “Plan A,” Swiss regulators reportedly told their nervous American counterparts on Friday night, March 17. But this means that UBS would have to swallow a lot of CS’s toxic holdings. “The big unknown concerns the risks in CS’s investment banking. These had previously deterred UBS bosses from buying CS.” But someone has to do it. In the end, it might be that UBS leaves the toxic part to the Swiss National Bank, according to Inside Paradeplatz.
Reuters reported that “the frantic efforts to shore up Credit Suisse come as assurances from policymakers—from the European Central Bank to U.S. President Joe Biden—that the global banking system is safe, fail to assuage fears about broader troubles in the sector.” They admitted that “investors and bankers think the loan facility from the Swiss central bank [SNB] only bought it time to work out what to do next.... In an unusual move, the ECB held an ad hoc supervisory board meeting, its second this week, to discuss the stresses and volatility in the banking sector.”