When someone says Switzerland, you might think of clocks and banks. All because of the country’s reputation for producing a high-quality products in all these areas of endeavour.
Well, it’s time to think again as the clock is ticking, if not tocked, on Switzerland’s banking sector.
Credit Suisse, which had an enviable reputation as part of the world-class Swiss banking sector, is, in effect, no longer part of the zeitgeist, courtesy to decision-making, which should be a lesson to all.
Having once promoted itself as a leading financial services company advising clients in all aspects of finance across the globe and around the clock, Credit Suisse stands no more, having been humiliatingly bought out by its rival UBS.
It’s a buyout that appears to have been orchestrated exceptionally quickly to avoid irreparable economic turmoil, not only in Switzerland but one suspects also throughout Europe, if not around the world.
Simply put, Credit Suisse was too big to fail. But, unfortunately, the fact that it has failed is largely glossed over by the purchase of it by UBS.
Is This an Exception, or Has the House of Cards Collapse Begun?
Given the developments across the ocean in Silicon Valley with a bank collapse and rumours of others being in a precarious state, Credit Suisse’s demise will leave financial markets deeply troubled the world over.If there was one robust banking system, one would’ve thought it was the Swiss system, with its long and enviable record for stability and hardnosed administration. The term “banking prominence” was a synonym for the Swiss banking system.
The concern is that if Credit Suisse can fail, so can every other financial institution.
For too long, it would appear that those involved in the financial markets thought the foundations were so secure and reinforced that failure or collapse was not an option or possibility.
This shows how terribly wrong things have gone for this turn of events to have occurred and the rapid speed at which it happened.
Everyone will have their own diagnosis of what went horribly wrong and why.
Some explanations will be over-defensive, claiming their banking model no longer suited the times to those that reflect on the management and their stewardship of billions of investors’ dollars.
A full and brutally robust analysis, one worthy of a doctorate thesis, needs to be undertaken on the leadership’s inability to read the market and respond.
In that thesis, there might be a section devoted to leaders taking their individual and collective eye off the ball in pursuit of trendy policies and agendas which may have served their inner virtue-signalling selves. Agenda that allowed for “sophisticated” discussions at soirées about a carbon-constrained world order oblivious to the smooth rising of CO2 out of their champagne glasses.
It was only a matter of days ago that Credit Suisse boasted it had a pledge in place to cut absolute emissions tied to loans to the oil, gas, and coal sector by 49 percent by 2030 and said emissions from loans to those clients had fallen 64 percent by the end of 2022. No blame will be attached to this dubious strategy.
As prices for these commodities steadily rose and returns continued to increase, Credit Suisse’s investors were denied the benefits based on an at-best suspect ideology rather than sound investment considerations.
An analysis of what lessons were taken from the 1995 Barings or the 2008 Lehman Brothers debacle and what steps were taken to avoid such catastrophe would be worthy of a separate doctorate thesis. That said, most of us could possibly already write the conclusion—complacency.
Some commentators have been warning corporate managers that if they go woke, they will go broke.
For most managers, it is not their personal money that disappears but investors who have been convinced to invest with them.
Their responsibility is overwhelming, for which we are told they deserve overwhelming salary packages.
But in the event of failure, it seems the shareholders lose their hard-earned dollars while those responsible can either retire on their substantial past earnings or simply slide into their next gig.
Credit Suisse’s management strategy had more holes than its country’s famous cheese. So let’s hope bankers around the world return to investment strategies that take their fiduciary duties to investors as paramount.
