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Credit Suisse crisis is the ‘failure of casino-like financial system’

Credit Suisse Chairman Axel Lehmann, left, speaks beside Colm Kelleher, Chairman UBS, during a press conference, on Sunday, March 19, 2023 in Bern. © Keystone / Peter Klaunzer

The UBS takeover of Credit Suisse exposes the flaws in a system that was supposed to prevent a bank the size of Credit Suisse from going bankrupt, says economist Marc Chesney.

Chesney, an out-spoken critic of the Swiss banking system, doesn’t mince words when he talks about Sunday’s announcement of the CHF3 billion ($3.2 billion) Swiss-regulator-engineered takeover of Credit Suisse by its bigger rival UBS. The professor of mathematical finance at the University of Zurich and author of the book Permanent Crisis is still wrapping his head around how things transpired over the last week.

In the end, it is the taxpayers who pay the price for lax regulation and bad decisions by bank executives, he laments.

SWI We have seen that all the guarantees put in place since the 2008 subprime crisis have been shattered in one week. What are the lessons learned from the Credit Suisse case?

Marc Chesney: It’s an economic and political failure. Last week, the Swiss National Bank (SNB) was telling us that the situation is more or less under control, that Credit Suisse has enough liquidity and equity. But an hour later, Credit Suisse was asking for a loan of CHF50 billion ($54 billion). A few days later, we learned that the institution was on the verge of bankruptcy.

That doesn’t inspire confidence and only reinforces the dangerous logic of “too big to fail” banks. After the sale, we will have a financial behemoth in Switzerland. What will happen next time, when it is UBS that is in trouble, like in 2008? Who will buy UBS? A cantonal bank? Where exactly are we going?

This is all done at the expense of taxpayers who bear the risk. The guarantees given indirectly to UBS through the Swiss National Bank are enormous. That’s clearly going in the wrong direction. And I ask the question: what did politicians do these last 15 years? What happened is extremely disappointing. [Switzerland’s] “too big to fail” bank law hasn’t solved the problems and has only accelerated concentration in the [finance] sector.

SWI: Is it these concentrations [in the finance sector] that are really the source of the problem?

M.C.: Yes, because as soon as you are dealing with so-called systemic institutions, the incentives are clear: they take on more and more risk at the expense of the taxpayer. If things don’t turn out well, it’s perfect for the managers involved because it’s the taxpayer who ultimately assumes the risk. So why would they not?

And we saw on Sunday [during the press conference to announce the sale to UBS] the question of the responsibility of the Credit Suisse executives wasn’t addressed. We have been dealing with people who feel they are owed their “pound of flesh”, who have received millions and millions of francs in bonuses. And then they disappear into thin air.


I’m not a lawyer but the question of responsibility arises, doesn’t it? These people regularly refer to the responsibilities and performance of their employees, but what are their responsibilities and performance? Their performance is negative, profoundly so. And they don’t assume their responsibilities.

SWI: On the legal level, what about the fact that they didn’t ask shareholders and were forced into the sale? Could the Saudis, who have invested heavily in the bank to the point of becoming majority shareholders, take legal action?

M.C.: There may be things we missed. Are we aware of everything? There has probably been contact between the two national banks, the SNB and the Saudi national bank. It is impossible to say at the moment whether the Saudi national bank, for example, will take legal action. Its strategy was to seize the opportunity to gain a foothold in a major Swiss bank at a very low price.

The problem is that this bank has gone bankrupt. So, this supposedly good deal became a very bad one. The Saudi national bank should have seriously analysed the situation. I remember one of the statements coming from Saudi Arabia, especially from the Saudi national bank, saying that they had confidence in the management of Credit Suisse. The Saudis obviously should not have.

Marc Chesney is a professor of mathematical finance at the University of Zurich and author of the book Permanent Crisis: The Financial Oligarchy’s Seizing of Power and the Failure of Democracy.

SWI: What will happen to the name Credit Suisse? Will it continue to exist, or will it disappear like the now defunct Swiss Bank Corporation when it merged with UBS in 1997?

M.C.: In the short term, the name will continue to exist. After that, it will be up to UBS to decide. This name is associated with a history in Switzerland. Alfred Escher must be turning over in his grave watching what happened to the bank he created [in 1856]. In France, when the bank Crédit Agricole bought Crédit Lyonnais, the name of the latter remained. But in the long run, it will be up to UBS to decide.

SWI: With the sale, the global financial system has calmed down a bit?

M.C.: It’s all short-term. Already on Thursday things started to calm down with the injection of CHF50 billion, and on Friday we learned that Credit Suisse was on the verge of bankruptcy. We are dealing with a casino-like finance system: you have actors who are playing poker with taxpayer money. One day they win, one day they lose. But at the end of the day, it’s the taxpayer who assumes the costs. This time, it’s Credit Suisse, a couple weeks ago it was Silicon Valley Bank in the US.

What you can see is that the meagre regulations put in place after the 2008 crisis have been diluted, which is what the government of the former US president Donald Trump did deliberately since 2016. The big banks are a “black box”: citizens aren’t aware of the risks incurred by the banks considered “too big to fail”.


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And when the information arrives, it’s already a done deal, as we saw on Sunday evening. Transparency is lacking. We don’t know where we’re going. There should be taxpayer representatives on the boards of these systemic institutions, that’s clear. Not from the state, because the state has failed. But the taxpayer can’t assume risks without being involved in decisions. It’s simply scandalous.

SWI: So, you feel that this crisis calls everything into question?

M.C.: For me, it’s not just about the bankruptcy of Credit Suisse. It is the failure of a casino-like financial system. It is the failure of the politicians who have done nothing for fifteen years, or at least nothing serious. This is also about the failure of the teaching of finance in academic circles. I have been publishing opinions in newspapers in Switzerland for a long time to draw attention to the risks associated with Credit Suisse. I am part of a very small minority from university. This passivity of the academic world poses a problem.

SWI: How is the academic world responsible for this fiasco?

M.C.: Apart from a few exceptions, banking specialists in Switzerland have expressed little criticism. When there was Covid, professors and the world of medicine spoke out often. We could agree with them or not, but we saw them appear in the public space.

Here finance professors are quite discreet. I would like to understand. A university professor in Switzerland is well paid by the taxpayer, precisely to critically analyse situations and propose solutions. But there are also financial institutions that grant salary supplements to certain professors. Of course, if you are paid indirectly by Credit Suisse, you will be less likely to criticise it.

SWI: You are very critical of this takeover. Why then do countries like the United States and France welcome this decision?

M.C.: In these countries, the declarations come for the moment from investors. I’m representing the taxpayer in this case. Statements from financial circles are intended to calm investors. A professor in this field must analyse the situation objectively and communicate the seriousness of the situation and the measures to be taken.

And the more we are told that the situation is under control, the more doubts we have. We saw it again a couple weeks ago when US President Joe Biden stepped up to say that everything was under control. Here, the Swiss National Bank, on Wednesday and Thursday, said the same thing. The more everything is under control, the less it is.

Adapted from French by Jessica Davis Plüss/sb.



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This content was published on His journey takes us to the heart of a $7,000 billion secret. The Swiss hold a third of all global offshore assets, shored up by conservatism and strict banking secrecy laws. With half of this market, just two banks – UBS and Credit Suisse – dominate the heart of the banking sector.

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