Credit Suisse Collapse May Worsen the Swiss Would Worsen, Say 39%

Credit Suisse, a Swiss multinational investment bank and financial services company, experienced a collapse in early 2021 due to a series of costly missteps and scandals. The bank suffered massive losses from its exposure to Archegos Capital Management, a family office that failed to meet margin calls on its highly leveraged bets.

Additionally, Credit Suisse faced losses from its involvement with Greensill Capital, a supply chain finance company that filed for insolvency in March 2021.

These events led to a significant decline in Credit Suisse’s stock price and triggered regulatory investigations. The bank’s CEO, Thomas Gottstein, and other top executives faced criticism for their handling of the situation, and several high-level personnel charges were made.

Lastly, the final nail in the coffin came when Switzerland’s largest bank announced a takeover of Credit Suisse in an effort to prevent a financial market panic and cripple Switzerland’s economy.

“UBS today announced the takeover of Credit Suisse. This takeover was made possible with the support of the Swiss federal government, the Swiss Financial Market Supervisory Authority FINMA and the Swiss National Bank,” the Swiss National Bank announced in a statement.

The collapse of Credit Suisse has raised questions about the bank’s risk management practices and the broader culture of the banking industry. It has also highlighted the need for increased oversight and regulation to prevent similar incidents from occurring in the future.

Real Research, an online survey app, recently launched a survey on the collapse of Credit Suisse to gauge the public’s opinion and awareness of the collapse of Credit Suisse and how it would impact the Swiss economy.

Highlights

• 63.18% are aware of UBS’ takeover of Credit Suisse
• The collapse of Credit Suisse would affect Swiss’ stable financial reputation, stated 36.65%
• 43.01% confident that the UBS deal would secure financial stability in the economy

According to Real Research’s survey, we asked the participants about their awareness of the UBS takeover of Credit Suisse. The survey results revealed that 63% of the respondents were well aware compared to 37% unaware of the deal.

The Downfall of Credit Suisse

In the following poll, we asked the respondents about their opinion on the collapse of Credit Suisse. The results revealed that a majority of 29% cited that the collapse would affect the global banking industry and the collapse would affect Switerzland’s economy (15%).

Additionally, another 15% stated the collapse would affect Switzerland’s banking sector, followed by Credit Suisse was plagued by numerous scandals and challenges (12%), and 11% stated the collapse was anticipated.

A Timeline of Scandals and Failures

Credit Suisse has supported the industrialization of its alpine homeland and helped position Switzerland as a linchpin of international finance. It even competed with Wall Street’s investment banking titans.

A steady drumbeat of scandals and poor results has demolished Credit Suisse’s reputation as a significant global player and a worthy competitor of local rival UBS over the last three years.

We asked the participants which of the following is likely to have contributed the most to the collapse of Credit Suisse. Most participants (55%) stated the 2011 incident where Credit Suisse was fined $536 million for violating US sanctions against Iran, Sudan, and other countries. 23% cited the 2012 incident where alleged tax evasions through secret Swiss bank accounts.

Additionally, 6% stated that misleading investors about the performance of its “dark pool” trading platform took a significant toll on Credit Suisse.

How UBS is Supporting Switzerland’s Economic Growth and Development

UBS (formerly Union Bank of Switzerland) proposed to take over Credit Suisse in an effort to prevent worldwide and local instability, citing it as an “emergency rescue.” We asked the participants in our survey whether this deal would actually provide the financial stability that was mentioned.

Results indicated that a majority (43%) stated the deal would “highly likely” prevent a financial crisis and secure stability and 31% stated “somewhat likely.” On the other hand, 3% stated the deal would “highly unlikely” guarantee financial stability, and 14% stated it as “somewhat unlikely.”

Apart from that, 40% of the respondents stated that the collapse of Credit Suisse would worsen Switzerland’s economy. Whereas 33% said it would remain the same and 28% said it would improve further.

Impacts on Switzerland’s Reputation

Switzerland’s financial system has earned a reputation for being relatively stable, and the collapse of a major bank such as Credit Suisse could potentially damage this reputation. To gain insight into this issue, we asked our survey participants whether they believed the collapse of Credit Suisse would impact Switzerland’s reputation as a financially stable country.

According to Figure 2, 43.97% of the respondents stated “probably” and 36.65% stated the collapse would “definitely” affect Swiss’ reputation. In contrast, 11.57% stated “probably not” and a minority of 1.55% stated, “definitely not.”

Similarly, when asked about the ramifications of the collapse of such banking institutions,, 23.59% answered the loss of trust in Switzerland’s secretive financial system would be a repercussion of the collapse. 15.52% stated economic instability, 13% stated government intervention, 12% stated investor losses, 9.72% stated job losses and another 10% stated regulatory scrutiny.

Likelihood of a Global Banking Crisis

Silicon Valley Bank (SVB) was a California-based bank that experienced a bank run in the early 1980s, which ultimately led to its failure. The bank run occurred when a large number of depositors withdrew their funds from the bank due to concerns about its financial stability.

This event is notable as it is considered the second-largest bank failure in the history of the United States and the largest since the 2007-2008 financial crisis. The failure of SVB had significant implications for the banking industry and prompted increased regulatory scrutiny of banks and their practices.

Accordingly, we asked our participants about the likelihood of a global banking crisis emerging. A total of 77% feel that a banking crisis is likely; 40.59% state highly likely, and 36.11% stated somewhat likely. Whereas, 3% stated highly unlikely, and 12% stated somewhat unlikely.

Ultimately, the incidents have exposed weaknesses in the bank’s risk management, governance, and compliance practices, resulting in significant financial losses and reputational damage. The fallout from these scandals has led to increased scrutiny of the banking industry as a whole and highlights the importance of strong risk management practices and effective regulatory oversight.

Credit Suisse’s collapse serves as a cautionary tale for banks and underscores the need for a renewed focus on transparency, accountability, and ethical conduct in the financial sector.