nesses. However, Swiss-managed companies have always had an extremely hard time of it in London and New York, where investment bankers have a completely different mindset. The approach in these English-speaking financial centres sits uncomfortably with Swiss business culture. Furthermore, the Swiss big banks often employed second-rate staff in London and New York, who behaved like mercenaries and were only out to make as much money as they could as quickly as possible. UBS took over CS in June and is now a huge bank. Will this story end well? Just to give some perspective: the new UBS is smaller than the UBS before the financial crisis – and will probably shrink a bit more. But it is still very big of course, with a balance sheet twice the size of Switzerland’s GDP. Will the story end well? I don’t know. However, it is highly likely that this new banking giant will also find itself in a predicament and need the government to step in. It is already clear that greater regulation will not solve the problem. Politicians are nevertheless calling for greater regulation of systemically relevant banks. Banks having more of a buffer, i.e. a greater share of equity, would make comprehensive report on what went wrong at CS. It owes Switzerland that much. Despite losses and scandals, CS paid exorbitant salaries and bonuses. Some bankers only seem to be driven by greed and are ready to risk everything in their pursuit of money. What happened to the entrepreneurial bank of yesteryear that helped to develop the country’s economy? CS kept supporting business until the very end, doing a very good job with its corporate lending. It is true that founding father Alfred Escher and his peers invested in infrastructure in the 19th century, but the railways were also a risky business. The early years at Schweizerische Kreditanstalt were turbulent, with railway stock prices going up and down. Bankers earned handsomely when things went well, but their bonuses vanished into thin air when stocks plummeted. That is the difference from today. CS did make mistakes because of greed, but the bank’s demise was mainly down to the incompetence of the Board of Directors and management. Why this incompetence? From the 1990s onwards, the Swiss big banks turned into international busi2010 2011 2021 Excessive bonuses at CS CS CEO Brady Dougan (photo) receives a record bonus of almost 71 million francs in addition to his annual salary of around 19 million francs. The excessive bonuses at CS continue to attract criticism in Switzerland over the following years, but the bank’s shareholders keep approving them. CS loses billions Risky investments in finance company Greensill and the hedge fund Archegos result in losses running into the billions for Credit Suisse. The Swiss Financial Market Supervisory Authority (FINMA) opens proceedings over Greensill and imposes remedial measures on CS. Too-big-to-fail law Parliament approves a bill from Finance Minister Eveline Widmer-Schlumpf (photo) to impose greater regulation on systemically relevant banks, including UBS and CS. Such banks are “too big to fail”, because their failure would damage the economy. Capital requirements are increased, and a bank resolution framework is put in place. 6 Focus
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