Credit Suisse: A Long Way Down - Comprehensive Notes

I. Timeline

  • The presentation focuses on the downfall of Credit Suisse, examining its trajectory through various phases marked by scandals and financial instability.

  • The timeline is divided into three phases:

    • Phase 1: Marked by violations of foreign supervisory and tax laws, manipulation of reference rates, cartel agreements, and a problematic compensation culture (dates around 2009).

    • Phase 2: Characterized by a series of scandals occurring between 2020 and 2023.

    • Phase 3: The terminal stage, leading to the bank's emergency takeover.

II. Phase 1: Violations and Unethical Practices

  • Violations of Foreign Supervisory Laws

    • Significant fines levied in the US and UK from 2002-2022, totaling $6,852,900,000 between 2013 and 2022, and $295,000,000 between 2002 and 2012.

    • This represents a 2,300% increase in foreign fines, indicating a growing trend of non-compliance.

    • Examples of fines:

      • February 21, 2014: 196,000,000196,000,000

      • September 28, 2015: 4,250,0004,250,000

      • January 31, 2016: 94,300,00094,300,000

      • October 5, 2016: 90,000,00090,000,000

      • January 18, 2017: 5,280,000,0005,280,000,000

      • April 4, 2017: 5,750,0005,750,000

      • July 5, 2018: 77,000,00077,000,000

      • September 28, 2018: 10,000,00010,000,000

      • September 22, 2020: 600,000600,000

      • October 19, 2021: 475,000,000475,000,000

      • September 27, 2022: 125,000,000125,000,000

      • October 17, 2022: 495,000,000495,000,000

  • Violations of Foreign Tax Laws

    • May 20, 2014: Credit Suisse admitted to aiding and abetting tax evasion of US citizens, resulting in a fine of 2.6billion2.6 billion. Share price: CHF 20.39.

    • October 24, 2022: Agreed to pay €238m (234m234m) to settle a French criminal case on aiding and abetting tax fraud. Share price: CHF 4.39.

    • March 29, 2023: U.S. Senate Finance Committee found that Credit Suisse violated the 2014 plea deal. No sanctions yet. Share price: CHF 0.82.

    • Total fines for tax law violations amounted to 2,838,000,0002,838,000,000.

  • Manipulation of Reference Rates and Cartel Agreements

    • Involvement in the LIBOR scandal (fined €9.2m in 2014).

    • Gold price manipulation by a Credit Suisse banker in the US (criminal verdict in 2022).

    • Forex manipulation (fined €83.3m in 2021).

    • Total fines for manipulation of reference rates amounted to €92,500,000.

  • Compensation Culture

    • Graphs illustrating the compensation of management and the Board of Directors from 2007-2022 indicate substantial figures even during years of financial losses.

    • Management compensation ranged from 32.22 million CHF to 162.10 million CHF

    • Board of Director's compensation ranged from 9.13 million CHF to 25.40 million CHF.

III. Phase 2: Scandals Between 2020 and 2023

  • February 7, 2020 – Spygate

    • Credit Suisse hired private investigators to spy on its former head of wealth management, Khan, who had moved to UBS.

    • The Board of Directors downplayed the incident and allegedly lied to the public.

    • CEO Tidjane Thiam resigned as a consequence.

    • FINMA found serious organizational shortcomings and attempts to cover up the spying.

    • Share price fell from CHF 12.21 to 6.43.

  • March 8, 2021 – Collapse of Greensill Capital

    • Credit Suisse had heavily invested in Greensill Capital, a firm specializing in short-term corporate loans.

    • The collapse of Greensill led to the closure of four connected funds with approximately 10b10b invested.

    • To date, CS was able to recover USD 7.4m.

    • FINMA concluded that Credit Suisse