Credit Suisse has failed and must be rescued by competitor UBS. Why have managers received gigantic bonuses for years despite sliding from one scandal to the next?
The major Swiss bank Credit Suisse is at the end: The global player in the financial industry has got into financial difficulties so dramatically that it is being taken over by its competitor UBS. The biggest bank merger since the financial crisis 15 years ago was frantically decided over the weekend.
UBS, also based in Switzerland, is doing this at the urging of the state, which is supporting the whole operation by taking on financial risks. Because Credit Suisse is “too big to fail”. It is too big to be allowed to go bankrupt without triggering an even worse banking crisis with unforeseeable consequences. After the experience of the 2008 financial crisis, shouldn’t such a scenario actually be avoided?
Instead, a major bank has to be rescued again, the managers of which have had high salaries and bonuses paid out for years. The Schweizer Tages-Anzeiger calculated that the top managers at Credit Suisse have received around 32 billion Swiss francs in bonuses since 2013, while the bank has made a loss of 3.2 billion francs in the same period (one franc is about 1 euro). . There has been a loss on the balance sheet five times in the past ten years.
Credit Suisse: What bonuses are paid?
After all, for 2022 the top floor of Credit Suisse had not paid out any bonuses for the time being, as the (NZZ) reports. In view of a particularly severe net annual loss of 7.3 billion francs, there were apparently too few arguments for a success fee. But even without bonuses, according to the NZZ, salary of 32.2 million francs flowed into the accounts of the bank management, only six million less than in the previous year.
There was still excitement about possible bonus payments on Monday: According to the Bloomberg news agency, Credit Suisse said in an internal letter that despite the takeover, all bonus and salary payments would be made as planned on March 24th. The Swiss finance minister Karin Keller-Sutter, on the other hand, assumes that the financial market supervisory authority will promptly issue a ban on bonuses, at least for management.
Endless scandals
However, one wonders why the Credit Suisse bankers have been able to post such lavish bonuses in the past few years. Because even apart from the sober numbers, the bank has not exactly shone with top management services. Quite the opposite: Credit Suisse and the managers responsible were embroiled in one scandal after the next:
- According to the public prosecutor’s office, the Bulgarian mafia used Credit Suisse accounts for money laundering from 2004 to 2007, for which the bank was convicted in 2022.
- In 2013, the bank provided a billion-dollar loan for fisheries projects in Mozambique, with Credit Suisse employees siphoning off $200 million for themselves and bribes. Penalties of 475 million dollars were the result.
- In 2019, Credit Suisse had a top manager who had switched to UBS monitored by detectives who even tried to snatch his cell phone during a chase. The head of operations and the head of security had to go as a result of the spy affair. The then bank boss Tidjane Thiam, who is said to have been personally in a clinch with the spied on ex-colleague, was first relieved when the bank was dealing with the scandal, but then had to go in 2020.
- In 2021, Credit Suisse lost a lot of money with jointly operated funds when the scandal bank Greensill collapsed.
- In the same year, the bank lost 5 billion Swiss francs because it had given the imploded hedge fund Archegos a lot of money for risky financial bets without paying enough attention to its own risk.
- In 2022, the “Suisse Secrets” research by the Süddeutsche Zeitung revealed that the bank also counted criminals, autocratic rulers and other questionable people among its customers.
Money lost, trust lost
All these scandals came at a price. According to the Swiss broadcaster, no other bank has had to pay as many fines, settlements and damages as Credit Suisse since the financial crisis. In the past ten years, around twelve billion Swiss francs have been paid in fines. How much credibility and trust the bank lost in the process can hardly be expressed in numbers. In any case, the collapse of Credit Suisse cannot be blamed solely on external factors such as the turnaround in interest rates.
According to some, Swiss politicians and financial authorities have stood by and watched the activities of the bank for too long. Others argue that even stricter regulation of banks ultimately cannot offer absolute security against mismanagement and its consequences.
Source: Stern
