Myths and legends of the market
The JC’s guide to the foundational mythology of the markets.™
For some years it has been an immutable rule of the market that if an unfortunate, weird, dumb, or preposterous thing happens in the market, Credit Suisse is sure to be involved and, if it hasn’t actually caused it, will be on the wrong end of it. This is the role that Deutsche Bank used to — and may once again now — play.
Bullet dodged — or opportunity missed?
Ironically — though, possibly causatively — Credit Suisse escaped the Global Financial Crisis comparatively unscathed. While its peers and competitors were being bailed out, nationalised, eviscerated, stress tested, analysed, supervised, inspected and generally groped with great snapping regulatory rubber gloves on parts of their institutional anatomies they didn’t know could be groped, old “Lucky” got a pass, sat pretty and thumbed its nose at all the hubris.
It may now wish it had been given the rubber glove treatment while the going was good. For its peers seem — and look, its always to early to say this sort of thing, but for now, they seem — the better for it: they look to have learned lessons about how banks should behave that Credit Suisse, apparently, did not.
A gradual, but insistent, descent into the abyss
So here we now are: after a period of seven or more years in which Credit Suisse seemingly was drawn, like a moth to a candle, to every financial catastrophe going — its spying on its own executives, Malachite, Archegos, Greensill, Evergrande, Covid-19, 1MDB, tax evasion, lockdown breaches, serial KYC and money laundering breaches, Bulgarian drug trafficking, a $500 million insurance fraud on the Georgian prime minister, $850m Mozambique tuna bonds fraud, and diverse sanction breaches — things looked like they were reaching an end-game in 2023 following the failure of the Silicon Valley Bank and a sudden market-wide loss of confidence in the Swiss lender.
The irony in all of this? The SVB collapse was perhaps the first major financial scandal in a decade that old “Lucky” the one-eyed dog had nothing to to with whatsoever.
But, when market confidence in the global banking sector sank, it sank even more for Credit Suisse, dropping 30% in a day on the Ides of March. When its cornerstone investor, the Saudi National Bank, baulked at a capital call, Credit Suisse was forced to beg for a public statement of confidence from the Swiss National Bank and, when that didn’t work, a CHF50bn liquidity facility. That was enough to end Credit Suisse’s prospects as a credible global banking institution.
The consensus remains that, while the bank isn’t dead as such, it is only not dead thanks to the iron lung it is presently strapped to, so we might as well wind it down now, since it ain’t coming back.
Who would want it? Good question.