Swiss bank Credit Suisse has been purchased by UBS Group in an all-share deal worth $3.25bn, resulting from the bank’s failure to manage its risk, legal issues, and management instability. Credit Suisse’s takeover by UBS is a government-brokered sale that avoids the bank’s abrupt collapse and the risk of contagion to the country’s banking sector. The combined assets of UBS and Credit Suisse are now about double the size of Switzerland’s GDP. In recent years, Credit Suisse has undergone numerous overhauls while acquisitions of Swiss rivals added to the complexity of their business model.
Credit Suisse once challenged Wall Street giants, but its assets had dwindled to $580bn, and the bank’s share value had plunged more than 95% from its pre-financial crisis peak. The bank has been plagued by scandals, including high-yield debt arrangements, and poor acquisitions. Credit Suisse survived the 2008 global financial crisis without a bailout, but its inability to make money and control risk led to recurring senior management changes that undermined its performance.
The once-storied Credit Suisse recently made the headlines for the wrong reasons, with a private banker’s fraud in 2015, and in 2019, a boardroom spying scandal that exposed a corporate culture that valued personal vanities over ethical and legal boundaries. The in-fighting between then-CEO Tidjane Thiam and Iqbal Khan, Credit Suisse’s wealth management chief, over a disparaging remark about Thiam’s garden, evolved into a corporate scandal that shattered the bank’s reputation for discretion. The Swiss banking regulator uncovered five additional cases of surveillance from 2016 to 2019, revealing the toxic atmosphere at the top that contributed to damaging the bank’s operations.
Home to 243 banks and 24 foreign branches, Switzerland’s stability and wealth are hugely reliant on the finance sector, and Credit Suisse’s demise could have significant consequences for the country. Switzerland’s government regrets that Credit Suisse failed to master its own difficulties, but it could not stop the loss of confidence from markets and customers that fatally undermined the bank’s survival. The sale of Credit Suisse to UBS avoids a disorderly collapse, and combined with the protection of Swiss banking laws, it opens a new chapter for both banks. The UBS acquisition brings the bank back to where it was pre-Lehman Brothers’ collapse.