Republic of the Philippines

Bulacan State University Bustos Campus

Poblacion, Bustos, Bulacan

In Partial Fulfillment of the Requirements in Monetary

Policy and Central Banking (PCFM 303)

Case Study: Credit Suisse

Submitted by:

Arcega, Rhea Fabian, Aira Venice

Austria, Pamela Clarise O. Manayao, Cess Ann
Cabral, Anjean Placido, Rosalinda
Cinco, Angela May Ramos, Bernadette
Dela Cruz, Jesseca Villarey Siapco, Frederick
Domingo, Liah

Submitted to:
Laurence C. Espino
Subject Professor
 I. INTRODUCTION

The world’s largest financial institution is Credit Suisse. Acted as a central role in the
history and development of Switzerland. Credit Suisse is a global investment bank and provider
of financial services headquartered in Switzerland. It has offices in all the world’s key financial
centers and offers investment banking, private banking, asset management, and shared services
from its headquarters in Zürich. It has a reputation for strict bank–client confidentiality and
banking secrecy. The Federal Reserve in the United States uses Credit Suisse as a primary vendor
and forex counterparty.
Credit Suisse and among thirty other banks, including JPMorgan Chase, Bank of America,
and the Bank of China, are listed by the Financial Stability Board, an international organization
that oversees the financial system, as “globally systemically important banks.” The year 1867 saw
Credit Suisse record its first-ever loss. Nonetheless, there were numerous potentials for Credit
Suisse to expand because to the development of other businesses in Switzerland and the railroads'
ongoing expansion. Through a series of mergers and acquisitions, it has grown to become the
second-biggest bank in Switzerland and one of the biggest banks in Europe.
Credit Suisse is the private bank for many entrepreneurs, wealthy, and ultra-wealthy
individuals and businesses. It has more than 150 offices in approximately 50 countries. It had just
over 50,000 employees and 1.6 trillion Swiss francs in assets under management at the end of
2021. The Swiss National Bank has designated it one of Switzerland's global systemically
important banks, whose failure would cause "significant harm to the Swiss economy and financial
system".

II. BACKGROUND
Credit Suisse, one of Switzerland's leading financial institutions since its predecessor
Schweizerische Kreditanstalt was founded in 1856, was one of 30 banks regarded globally as
systemically significant, and a total collapse could have destabilized the global financial system.
At the end of 2021, Credit Suisse had assets under management (AUM) of approximately $1.75
trillion, making it the second-largest bank in Switzerland after UBS. Credit Suisse employed over
50,000 individuals at the time. Note that Credit Suisse's AUM will have decreased to
approximately 1.3 trillion Swiss francs (approximately $1.4 trillion) by the end of 2022.
Credit Suisse dates back to July 5, 1856, when prominent politician, business leader, and
entrepreneur Alfred Escher founded "Schweizerische Kreditanstalt." It all began with the Swiss
railroads in 1856. The previous one was created when the country needed to finance the expansion
of its rail infrastructure. In addition, it began as a commercial bank in 1856, when Switzerland was
just commencing the industrial revolution. By the start of World War I, Credit Suisse had expanded
from Zurich to 13 other locations across Switzerland. Foreign investment came to a complete halt
with the start of World War I. Credit Suisse was essential in getting Swiss securities back on the
market after being sold to hostile investors. Additionally, during such chaos, Credit Suisse had to
delicately protect the interests of Swiss investors abroad. Credit Suisse employed over 50,000
individuals. Note that by the end of 2022, Credit Suisse’s AUM had decreased to approximately
1.3 trillion Swiss francs (approximately $1.4 trillion).
 During the global financial crisis, the company was one of the least affected institutions,
but afterward it began reducing its investment business, laying off employees, and cutting costs.
From 2008 to 2012, the bank was the subject of multiple international investigations for tax
evasion, which resulted in a guilty plea and the forfeiture of US$2.6 billion in penalties.

III. PROBLEM STATEMENT

Credit Suisse collapsed due to a series of scandals, management shifts, and significant
losses in recent years.

• 2019 and early 2020: Tidjane Thiam, CEO of Credit Suisse, resigned in February 2020
after a 2019 spying accusation. Iqbal Khan, the former head of wealth operations at
Credit Suisse, left for UBS and was recently monitored by private contractors to
determine whether he would pamper clients.

• 2021: During the epidemic, the bankruptcy of the U.S. family investment fund Archegos
Capital and the British financial institution Greensill Capital caused Credit Suisse to
incur a pretax loss of close to $1 billion. Credit Suisse's investment bank CEO and
principal risk and compliance officer resigned after the bankruptcy of Archegos. An
independent investigation of Credit Suisse's role in the Archegos accusation concluded
that the bank had failed to "effectively manage threat," but that no fraudulent or illegal
conduct had occurred.

• January 2022: Chairman Antonio Horta- Osorio resigned from the bank's board this
year, after roughly nine months in the position, due to a charge related to his violation
of Swiss and British COVID- 19 counterblockade protocols.

• July and August 2022: By late summer 2022, Credit Suisse's new CEO, Ulrich Koerner,
unveiled a strategic review that was hampered by unfounded rumors of impending
failure. This prompted visitors to withdraw 110 billion CHF ($119 billion) in the fourth
quarter of 2022.

• January 2023: Faced with a stock that lost roughly three times its value in a short period
of time, Credit Suisse announced early in 2023 plans to invest up to $ 54 billion to
bolster liquidity and boost investor confidence.

• March 2023: The bank's largest supporter, Saudi National Bank, stated that it would not
give Credit Suisse any additional capital due to nonsupervisory walls. Switzerland’s
executive branch votes to allow the takeover without shareholder approval. The defeats
of U.S. banks Silicon Valley Bank and hand Bank in early March 2023 constituted one
of the final events preceding UBS' acquisition of Credit Suisse. They urged the U.S.
government to provide depositors with comprehensive assurances that money would be
available, but nevertheless spread fear throughout the global banking system.
IV. SOLUTION/ INTERVENTION

Credit Suisse announced that it would borrow up to $54 billion to strengthen liquidity and
investor confidence but believe that this amount is unlikely to be sufficient. Obtaining the support
of strategic investors may be one way to boost market confidence. Among its investors are the
Qatar Investment Authority and the Saudi conglomerate Oyalan Group. The bank has adopted a
strategy of catering to wealthy clients while cutting back its volatile investment banking business
and has already announced its intention of selling off to the latter.
The Swiss central bank announced that a government-orchestrated acquisition of Credit
Suisse by rival bank UBS had ended the financial turmoil. The Swiss National Bank announced
that it will provide substantial support for the merger of Switzerland’s largest banks and that the
late announcement by the federal government, financial regulators, and the central bank “put an
end to the crisis.” UBS announced on 19 March 2023, following negotiations with the Swiss
government, that it would acquire Credit Suisse for $3.25 billion (CHF 3 billion) to prevent the
bank’s collapse. While the transaction is under review, Credit Suisse continues operations.
The $3.25 billion deal intended to stabilize the global financial system after the collapse of
two U.S. banks and jitters about Credit Suisse’s long-running problems caused shares of
Switzerland’s second-largest bank to decline and customers to withdraw their funds. The deal was
completed after the executive branch of the country passed emergency measures that evaded
shareholder approval.

V. DISCUSSION/RECOMMENDATION
According to Credit Suisse's proposed solutions for its impending collapse and the
interventions made by the Swiss National Government and Swiss Central Bank, the collapse of
Credit Suisse could have a negative impact on Switzerland's reputation as a solid and resilient
banking nation. The loss of one of the country's earliest financial institutions, the bank that
financed the construction of Switzerland's railways, could have a devastating effect on Swiss
citizens within and outside the banking industry.
The failure of the troubled lender Credit Suisse would have crippled Switzerland's
economy and financial center, and likely caused deposit runs at other financial institutions. It was
estimated that up to 12,000 employments would be lost in Switzerland, although the impact on the
economy would be limited.
Therefore, to stabilize Credit Suisse and prevent the crisis from spreading to the
international banking sector, the merger plan was ultimately chosen. The resolution recourse
would have reduced the size of Credit Suisse, with the Swiss National Bank providing liquidity
assistance loans supported by a federal guarantee against default. The bank's equity and AT1 bonds
would have been reduced to zero, while other bondholders would have been bailed out.

RECOMMENDATION

1. Do not disregard the warning indications.

 In 2017, when the company was considering an investment in Greensill, several
members of its credit-structuring team petitioned against it. Their primary concern was that
a portion of Greensill’s assets were linked to the British steel tycoon Sanjay Gupta. Gupta
was at the center of a shipment scandal in 2016, which resulted in four banks severing
connections with him. The competitor asset management company GAM severed ties with
Greensill in 2018. Following this, the German financial regulatory agency BaFin flagged
the hedge fund for improper behavior (they have since lodged a criminal case against
Greensill for balance-sheet manipulation).
Credit Suisse chose to disregard these warning signs and turn a blind eye. In
October 2020, Greensill requested a $140 million loan from the bank, which was granted.
As the saying goes, the rest is history.
Even in the case of Archegos, Credit Suisse was presented with numerous red flags.
Bill Hwang manages Archegos. In 2012, Hwang was convicted of market manipulation
and insider trading by the SEC. Intriguingly, Hwang has a history of making risky financial
betting, having previously led the ineffective Tiger Asia hedge fund. Credit Suisse
executives were mindful of these facts but chose to disregard them.

2. Learn from your past errors.

The proverb “once bitten, twice shy” is presumably not one that Credit Suisse
practices. As previously indicated, this is not the bank’s first default. The corporation
contributed to the 2008 financial crisis by improperly insuring mortgage-backed securities,
an error for which they were fined $5.8 billion by the US Department of Justice.
The bank then lent $2 billion to three companies in Mozambique in 2013, a
transaction that ultimately led to a scandal that tarnished their reputation. Like their current
crisis, the Swiss company had multiple warning signs prior to closing the transaction. First,
the director of their African division, Fawzi Kyriakos-Saad, cautioned the bank against
doing business with corrupt companies. In addition, their credit structuring unit identified
numerous irregularities in the transaction. The bank stands to lose more than $600 million
due to the defective transaction. Adding insult to injury, the Mozambican government is
now prosecuting them. Given their infamous past, one might expect the bank’s investment
risk gatekeepers to pay better attention to alarm signals when they strike.

3. Know when to exit a position.

Credit Suisse recognized the signals but reacted slowly. In contrast, their
competitors acted promptly. They abandoned their poor investments like mice abandoning
a sinking ship, preserving their profit margins and reputations for the most part. While their
rivals abandoned their investments at the first sign of trouble, Credit Suisse's cautious
approach caused them to endure most of the losses. We believe that every financial
institution ought to have been considerably more proactive in its risk assessment and
management.
 4. Don’t skip out on risk assessment.
A thorough risk assessment will help your bank in identifying and mitigating risks
in a timely and accurate manner. Financial institutions will benefit from knowing what a
thorough assessment entails and what areas it considers. Budgeting and strategic planning
will be informed by the results of a financial risk assessment. A consistently thriving
company that is unconcerned about potential risks may be overlooking something that
could cause it to fail or lose out on opportunities.

5. Implement a daily, early-warning risk monitoring tool.

The development of early, daily, and monitoring warning systems or tools could
help in the prevention of economic and business catastrophes by providing a systematic
forecast of undesirable events. Early warning systems are primarily used to detect crises
before they cause damage and to reduce incorrect warnings of potential crises.

6. Resolution
This is a complicated process because the regulator also needs to ensure continuity
in retail banking and other key services to avoid panic in the wider financial system. As
part of reforms after the global financial crisis, regulators, and large banks such as Credit
Suisse are supposed to have plans in place before a crisis is reached so that they can be
resolved smoothly. But the plans for resolving Credit Suisse were still incomplete despite
years of preparation.

Additionally, banks must increase their investments in digital growth and transformation.
Credit Suisse fell behind other banks in adopting new technology and services that may improve
its efficiency, customer experience, and resilience. Furthermore, it missed out on chances to enter
new markets and sectors of the market. The failure of Credit Suisse serves as a lesson for all banks
that wish to live and prosper in the post-pandemic period. If companies want to stay current and
avoid going out of style, they must be flexible, customer-focused, and accountable. Finally, banks
must promote a culture of responsibility, openness, and ethics. Also, its financial reporting
practices had "material weaknesses". Lack of inspection, ineffective communication, and
misalignment among Credit Suisse's board, top management, and stakeholders were major
problems.

VI. CONCLUSION
In conclusion, Credit Suisse's collapse can be attributed to a combination of factors,
including losses from Archegos and Greensill, risk management failures, leadership issues, and
reputation damage. While the bank has taken steps to address some of these issues, it remains to
be seen whether it can fully recover from the damage done to its financial health and reputation.
The bank hopes to overcome this by effectively managing the risk. The CEO together with their
chairman was hold their reputation not to involve in any scandals and the legal conduct must be
practice.
In this case study, we learned that even the world's largest bank with a high net worth is
often critical of the global banking hub and makes the financial system unstable. Credit Suisse is
the leading financial institution globally, but they cannot manage the risk that could result in a full
collapse and the global financial system becoming devastated. Time will tell if the company is able
to establish a corporate culture that places a greater emphasis on risk management. In the
meantime, we should avoid repeating their errors.

VII. REFERENCES
5 Investment Management Lessons to Learn From the Credit Suisse Debacle. (2021, April 21).
TRaiCE. Retrieved April 15, 2023, from https://www.traice.io/post/5-credit-risk-management-
lessons-to-learn-from-the-credit-suisse-debacle
Biswas. (2023, March 15). What Has Gone Wrong at Credit Suisse – Explained. Mint. Retrieved
April 15, 2023, from https://www.livemint.com/news/world/what-has-gone-wrong-at-credit-
suisse-explained-11678809631102.html
Keaten, & McHugh. (2023, March 23). Credit Suisse Deal Averted Crisis, Swiss Central Bank
Says. AP NEWS. Retrieved April 15, 2023, from https://apnews.com/article/credit-suisse-ubs-
switzerland-bank-collapse-322332b9de476bce937c9e965b225a2f
Ziady, H. (2023, March 23). Too Big for Switzerland? Credit Suisse Rescue Creates Bank Twice
the Size of the Economy | CNN Business. CNN. Retrieved April 15, 2023, from
https://www.cnn.com/2023/03/23/investing/credit-suisse-ubs-impact-switzerland/index.html
Credit Suisse Group - company profile, information, business description, history, background
information on Credit Suisse Group. Reference for Business. (n.d.). Retrieved April 19, 2023, from
https://www.referenceforbusiness.com/history2/51/Credit-Suisse-Group.html
C. (n.d.). Who we are. Credit Suisse. https://www.credit-suisse.com/about-us/en/our-
company/who-we-are.html
What Happened at Credit Suisse, and Why Did It Collapse? (2023, March 28). Investopedia.
https://www.investopedia.com/what-happened-at-credit-suisse-and-why-did-it-collapse-7369825
R. (2022, October 3). Factbox: Credit Suisse’s scandals - spies, lies and money laundering.
Reuters. https://www.reuters.com/business/finance/spies-lies-chairmans-exit-credit-suisses-
scandals-2022-01-17/
CREDIT SUISSE Case Study 2018 - World Media Group. (n.d.). World Media Group.
https://world-media-group.com/case-study/credit-suisse-case-study-2018/ and Josh Mitchell, C.
M. (n.d.). Why Is Credit Suisse in Trouble? The Banking Turmoil Explained.
WSJ.https://www.wsj.com/articles/why-is-credit-suisse-in-trouble-the-banking-turmoil-
explained-6f8ddb5b
R. (2023, April 11). Credit Suisse job cuts must be frozen, bank employees leader says. Reuters.
https://www.reuters.com/business/finance/credit-suisse-job-cuts-must-be-frozen-bankers-leader-
says-2023-04-11/
Credit Suisse’s Ristevski poached by Macquarie. (2023, April 11). Australian Financial Review.
https://www.afr.com/street-talk/credit-suisse-s-ristevski-quits-heads-to-macquarie-20230412-
p5czqw
Iordache, R. (2023, April 5). Switzerland faced a full-scale bank run if Credit Suisse went
bankrupt, Swiss regulator argues. CNBC. https://www.cnbc.com/2023/04/05/switzerland-faced-a-
bank-run-if-credit-suisse-went-bankrupt-swiss-regulator.html
CS | Credit Suisse Group AG ADR Stock Price & News - WSJ. (n.d.). WSJ.
https://www.wsj.com/market-data/quotes/CS
Choudhury, I. R. (n.d.). The Credit Suisse collapse: What went wrong and what are the
lessons? www.linkedin.com. https://www.linkedin.com/pulse/credit-suisse-collapse-what-went-
wrong-lessons-indrajit-roy-choudhury
VIII. DOCUMMENTATION

For this task, we divide each topic so each member would have contribution in terms of
ideas. Each member was given the chance to decide what part in the report we would work on to
finish the task in due time. Participation of each member was monitored and appreciated.

After we know what part, we will work on we started to brainstorm the topic that we will
used. Everyone shared their thoughts on what they think would be easy to understand and
explain. Each opinion was considered and accepted. We come up to the best idea we know we
are capable to understand.
 Already know what our part we started to look for explanations and gathered information
that will help us to build our ideas. We search for credible sources on the internet and watch on
youtube some videos for additional support.
 After working on every assigned task, we compile the file to gather all the contributions
of each member. We also alloted a time to practice what would be the flow and how we will
present according to each members part for a organized and successful reporting.