Credit Suisse survived two world wars. it could probably bear a reputational hit

This brief respite should be used to force a radical change in both the management and ownership of the scandal-ridden Swiss bank.

If Credit Suisse had not been a global systemically important bank but something less lofty, such as an automobile with a long history in its prime, its track record of frequent, costly repairs would have warranted its junk long ago. must have done But the bank is too big to fail and needs to be bailed out, even as Iranian-American economist Nouriel Roubini, better known as Dr Doom, describes it as “too big to be saved”.

It should be remembered that many of Credit Suisse’s peers on the systemically important list were bailed out by government funding during the global financial crisis. With the ability to create money at will, central banks don’t understand what “too big to save” means.

But the problem would seem to be one of company culture — one that invites legal action and penalties time and again. The Guardian has Compiled a list of Credit Suisse scams, starting with the late, indecent Ferdinand and Imelda Marcos fraudulently helping the Mozambique tuna bond scheme with money stolen from the Philippines. Credit Suisse arranged a $1.3 billion loan for the government of Mozambique to fund, among other things, a state-sponsored fishery, allegedly withholding a portion of the money to some Credit Suisse bankers.

From ArcGos, a hedge fund with dodgy financing from Credit Suisse that went belly up, to Greensil, a securitization scheme for trade receivables, where there was a scandal, Credit Suisse was on the scene.

Depositors withdrew their funds in October 2022 after share prices began a long, slow decline.

The latest crisis comes amid concerns about the impact of a year of interest rate rises on the value of bonds held by Credit Suisse in its portfolio and the reluctance of its biggest shareholder to invest more in the bank.

Money laundering and helping clients evade taxes are repeat offenses for which Credit Suisse has paid heavy penalties. This can be understood as a strength, though not quite a virtue. It takes its private banking business – which manages $1.4 trillion in assets – very seriously, and its bankers, apparently, will not hesitate to break the law to meet their needs.

If its largest shareholder Saudi National Bank or any other acquirer is inclined to take control of the bank to take advantage of its manifest commitment to customer needs, it should be permitted. (It is easy to depict colorful advertisements, announcing the bank’s commitment to meeting the needs of each and every customer, with the tagline ‘No holds barred’). The Saudi National Bank’s explanation for why it was not stepping in with more equity to support the troubled bank was that it did not want to be subject to all kinds of new regulations should its stake exceed 10%.

Considering that distributed ownership, in which each shareholder holds less than 10%, has not helped ensure exemplary conduct by bank executives, it may be worth trying a more concentrated ownership structure, in which some Shareholders are being allowed more than 10%. , Bank’s

What banks need is a cultural change, and culture is driven from the top. The entire top management of the bank – not just the chairman and CEO – should be replaced with professionals with an exemplary track record. This new management should be overseen by a board that takes its job more seriously than has been displayed so far.

Credit Suisse was founded in 1856. It has survived the revolutions of the 19th century, the world wars of the 20th century, the rise and fall of empires and colonies, and has thrived amid profound economic and geopolitical changes. It may perhaps vindicate some irresponsible employees who were allowed to damage its reputation. If changing regulatory norms is the price for it, it’s worth paying, especially if saving Credit Suisse will end up beating other banks’ shares.