“They bungled”: Credit Suisse crisis draws concern and rebuke

Credit Suisse's problems have been made worse by a banking crisis in the United States. © Keystone / Urs Flueeler

The deepening crisis at Credit Suisse bank has been met with worry, dismay and anger from politicians, financiers and members of civil society.

Switzerland’s second largest bank has been forced to accept emergency funding from the Swiss central bank. The Financial Times reports that talks are taking place this weekend for UBS to take over its struggling rival.

+ Where did it all go wrong for Credit Suisse?

“They bungled, took risks they couldn’t control and made insane amounts of money doing it,” Swiss Trade Union Confederation chief economist Daniel Lampart told Swiss public television debate show Arena.

Left-leaning political parties are also critical of a seemingly unrestrained profit culture at a bank that has reeled from one scandal to another.

The Social Democrats want to bring forward planned parliamentary debates on better controlling the financial sector.

But Thomas Matter of the rightwing Swiss People’s Party pointed out on Arena that the taxpayer has so far not been asked to pay out a cent to rescue Credit Suisse.

Bank break-up

“The sooner the bank is split up or sold, the better,” star US economist Nouriel Roubini told the Tages Anzeiger newspaper. “Credit Suisse is too big. The weakness of one part, for example the investment bank, damages the good parts.”

But he warned that even a break-up of Credit Suisse would cause global shockwaves. “If you believe, for example at Credit Suisse, that such plans can avoid systemic effects in the event of a collapse, then that is an illusion.”

Other commentators also have divergent opinions on how Credit Suisse could be broken up if it fails to survive the storm.

“Either CS is properly wound up using standard methods that guarantee the bank’s healthy divisions can be saved, or it is taken over by another big bank, with [financial regulator] FINMA and the state providing [deposit] guarantees,” former Wegelin bank boss Konrad Hummler told the Neue Zürcher Zeitung newspaper.

But a merger of Switzerland’s two biggest banks might prove problematic, former FINMA head Eugen Haltiner told the CH Media group.

+ What does a Credit Suisse rescue mean for Switzerland?

The Competitions Commission “would certainly have significant reservations because both institutions have a dominant market position,” he said.

Silence damaging

Haltiner added that Credit Suisse and the Swiss authorities need decisive communication as the crisis unfolds.

“Silence would only encourage speculation in the media, which magnifies the fears of customers and market participants.”

“Many people are unaware that Switzerland has depositor protection,” Haltiner told the Watson news portal.  “And that the Swiss business of CS can be secured even in the event of a catastrophe because it would be outsourced to an independent company. All of that could have been articulated.”

The financial markets have been severely rattled over the last week, caused also by the collapse of Silicon Valley Bank in the United States.

Share prices of all banks plummeted around the world during a week of carnage. This has weakened Credit Suisse’s hand even further, adding to the woes of the struggling bank.