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2023-03-23 Economy
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A brief history of the collapse of Credit Suisse
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Direct Translation via Google Translate. Edited.
[ColonelCassad] Everything has a beginning and an end. Yesterday ended the history of the bank founded in 1856. Credit Suisse was created to finance the development of the Swiss and European railway system, as well as to lend to companies involved in the electrification of Switzerland.
In the second half of the 20th century, the bank boomed and launched new business lines - private banking, investment banking, asset management and insurance. The bank was involved in the construction of the Channel Tunnel, the merger of Chrysler and Daimler-Benz, and the purchase of Donaldson, Lufkin & Jenrette (DLJ).
In the 1900s, the bank moved into retail banking in response to the growth of the middle class and competition from other Swiss banks UBS and Julius Bär. CS expanded its activities outside of Switzerland and became one of the first international banks.
By the way, in the 90s, the first collaboration between Credit Suisse and the investment bank First Boston took place, and largely because of this cooperation, the problems of the bank began.
The combined company Credit Suisse First Boston (CSFB) was involved in investment banking, capital markets and financial services. CSFB has been involved in many major deals and projects such as the IPO of Google, the merger of AOL and Time Warner, etc.
The CSFB project was successful but ran into a number of problems in the early 2000s. Then it turned out that behind the success of CSFB is the manipulation of stock prices of Internet companies (the collapse of dot-com), violation of antitrust laws and ineffective risk management. But no sooner had CSFB recovered from the crisis at the beginning of the 2000s than a new crisis began to test its strength.
The investment division lost a lot of money due to the financial crisis of 2008-2009. The bank lost billions of dollars due to poor investments in subprime mortgage-backed securities and was forced to raise new capital from private investors in Qatar and Saudi Arabia.
The bank has also been accused of tax evasion by customers in the US and Germany. The fine amounted to about $3 billion.
After the crisis, the bank carried out a number of reforms to improve efficiency, safety and profitability. CS shrunk its investment portfolio, tightened its risk controls, raised capitalization requirements, and focused on its core business of private banking.
They also updated the logo and slogan, which made it clear who the main client base is - "The bank for entrepreneurs" (Bank for entrepreneurs).
The final stage of the collapse of Credit Suisse began in 2021. Then in March, the bank announced the closure and liquidation of several investment funds in the amount of $10 billion provided by another financial company Greensill Capital. Greensill filed for bankruptcy in March 2021.
Then in the same month, the bank suffered heavy losses due to a scandal with the American hedge fund Archegos Capital Management, which defaulted on its obligations to creditors, that is, collapsed. Credit Suisse was one of Archegos' main creditors and lost about $5 billion due to its default.
These events undermined confidence in the bank and led to the fall of its shares and bonds. CS also spied on its top managers, falsified the accounts of the Chinese company Luckin Coffee, and often got into legal disputes with clients and regulators.
One of the symptoms of big problems was the frequent change of leadership, including due to surveillance of them.
The US banking crisis is the final nail in Credit Suisse's coffin. Clients are withdrawing deposits, shares have lost more than 70% of their value, and no one wanted to buy with the bank's bonds. In the end, after tense negotiations over the weekend, UBS Group AG agreed to buy Credit Suisse in a share swap deal worth about $3.25 billion, less than the bank's market value.
UBS now plans to downsize Credit Suisse's investment arm and integrate its assets and customer base into its structure.
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Posted by badanov 2023-03-23 00:00||
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