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Is liquidation the only option left at Credit Suisse?


After another setback in the first quarter of 2022, Credit Suisse’s options for moving forward appear to be dwindling.

“This bank should be liquidated!” cried one finenews.asia reader on social media after Credit Suisse announced another quarterly loss on Wednesday. Bad news seems to arrive with numbing regularity at Switzerland’s second-largest bank.

Such news is not made less dire even as a CEO Thomas Gotstein said in February that 2022 would be a “transition year” and the bank would still make a profit. It seems a long time ago. A closer look quickly reveals that the issues now run much deeper, and several things are striking.

Superior Discipline of Crisis Management

That Credit Suisse suffered a quarterly loss simply due to the increase in provisions suggests that business activity has fallen massively. For a financial institution undergoing what is supposed to be a turnaround of historic proportions, the optics are rather poor.

It is also striking that the bank is facing problems on virtually all fronts. For once, the latest provisions, unfortunately not disclosed in detail, do not come from investment banking, which is riskier in itself, but from asset management. In other words, the supreme discipline of the bank.

Persistent contradictions

The provisions announced Wednesday would be linked to “many small cases”, some dating back ten years, and the scandal of embezzlement around the former customer adviser, now deceased. Patrice Lescaudron. In this case alone, Credit Suisse is still liable to a fine of approximately $500 million, because finenews.asia also reported.

This leads to the conclusion that in the last ten years alone, Credit Suisse has engaged in questionable and even criminally relevant practices in all of its divisions, the possible exception being its activities in Switzerland. This contrasts sharply with the numerous assurances given by a myriad of Credit Suisse CEOs and Chairmen, who have repeatedly asserted that the scandals that have come to light are only isolated incidents, as also asserted by CEO Gottstein l last year about the debacles surrounding Greensill and Archegos.

Not the right time for mergers

If speculation about the fate of Credit Suisse takes place, there are not as many options open as it seems. After all, the extensive planning required for a merger with another European bank has probably evaporated this year due to the war in Ukraine, soaring inflation and the end of easy money from central banks to the markets. financial. There are too many imponderables for two large institutions to embark on such an adventure.

At the top, a management team remains which, although it has undergone some personnel changes, still has two key players in CEO Gottstein and General Counsel. Romeo Cerutti who, each in their own way, have played a significant role in the recent debacle. Under these premises, any new start seems unlikely.

Imminent personnel changes

That rumors have been circulating for a few weeks in Zurich’s financial circles that Cerutti could leave his post is not surprising given the numerous legal cases that CS is facing today. If that were to happen, the logical consequence would be that Gottstein would leave his post as well.

Louis Brandeisa former Associate Justice of the United States Supreme Court, wrote a collection of essays entitled “Other People’s Money and How Bankers Use It” in which he observed that “sunlight is considered the best of disinfectants. A new managing director at Credit Suisse would do well to heed this advice and open the windows and let the sun in.