- March 20, 2023
From scandal to takeover: A look at Credit Suisse’s downfall and UBS’s emergency intervention
Credit Suisse’s tumultuous past, marred by scandals and fines, culminated in $3.2 billion takeover by long-time rival UBS.
Beleaguered Swiss banking giant Credit Suisse will be bought by long-time rival UBS in a whopping $3.2 billion deal, eight months after the troubled bank’s Chairman Axel Lehmann denied any intention to merge or sell the bank after its third straight quarterly loss. And now, a hasty, overnight takeover by UBS after the bank found regulators at its doorstep is just the coup de grace.
This is the latest addition in the global banking industry crisis after the Silicon Valley Bank and Signature Bank crashes in the United States became the second and third largest bank failures in the country’s history.
One of the world’s leading financial institutions, Credit Suisse providing various financial services and products to its clients. However, the bank, in its 167-year-old history, has also been embroiled in several scandals over the years, which have damaged its reputation and caused significant financial losses.
One of the earliest scandals involving Credit Suisse occurred in 1997 when the bank was accused of helping wealthy clients evade taxes in the United States. The bank was alleged to have set up offshore accounts in the Cayman Islands and other tax havens to enable clients to hide their assets and avoid paying taxes. This resulted in a $100 million settlement with the US government, and the bank was forced to admit that it had engaged in illegal activities.
Another significant case involving Credit Suisse occurred in 2008 when the bank was implicated in the subprime mortgage crisis. The bank had invested heavily in subprime mortgage-backed securities, which were later revealed to be highly risky and caused significant losses. The bank had to write down billions of dollars in losses, and its reputation was severely damaged as a result. Credit Suisse was one of the few lenders who did not accept a bailout during the same year’s global financial crisis. UBS, at the point, was on the verge of collapse. A decade and half later – the tables have turned.
In 2014, Credit Suisse was fined $2.6 billion by US authorities for aiding US citizens to evade taxes. The bank was accused of using a complex system of offshore accounts and sham companies to help clients hide their assets and avoid paying taxes. It resulted in a significant loss of trust in the bank, and it had to pay a hefty fine to settle the charges.
In 2016, Credit Suisse was again implicated in a case involving its dealings with Mozambique. The bank was accused of helping the Mozambican government to borrow more than $2 billion, which was later revealed to have been used to fund questionable projects such as a fishing fleet and a shipyard. The projects were alleged to have been overpriced and of little use, resulting in a significant loss of public funds. This resulted in Credit Suisse being fined $47 million by Swiss authorities and an investigation into its business practices.
In 2018, Credit Suisse was involved in a high-profile scandal involving fraud and corruption in Malaysia. The bank was accused of facilitating the embezzlement of billions of dollars from the 1MDB (1Malaysia Development Berhad) sovereign wealth fund. This involved several high-profile individuals, including former Malaysian Prime Minister Najib Razak and Goldman Sachs executive Tim Leissner. Credit Suisse was fined $47 million by Swiss authorities for its role in the case.
In 2020, Credit Suisse was again implicated again in a case involving Greensill Capital, a financial firm that had filed for bankruptcy. Credit Suisse had invested heavily in Greensill Capital, which had been accused of engaging in fraudulent activities. The scandal resulted in significant losses for Credit Suisse, and it had to suspend several investment funds as a result.
The bank has had to pay significant fines and has suffered reputational damage over the years highlighting the need for transparency in the banking industry. The scandals have also raised concerns about the bank’s internal controls and risk management practices, and it has had to implement various measures to address these issues.
Written by Stella Dey