«Zombie» is an apt moniker for Credit Suisse, now that it's crystal clear that without intervention, the bank would have been history last fall. Outflows were even greater than the bank admitted.

What Credit Suisse experienced in October was nothing less than a «bank run.» That's how Marlene Amstad qualified the situation of Switzerland's second-largest bank last fall at a press conference on Wednesday. The chair of the Swiss Financial Market Supervisory Authority (Finma) stated for the first time that Credit Suisse was already doomed then.

It was only thanks to additional liquidity cushions which Credit Suisse triggered over the summer at the behest of the supervisory authority as part of «too big to fail» regulations, that it was able to survive beyond October at all.

Lehmann's Statements in Perspective

Amstad said that Credit Suisse clients pulled 138 billion francs out of the troubled bank during the fourth quarter, significantly more than the 110 billion francs the bank reported. That is likely to still be a heated topic of discussion for some time. Finma Director Urban Angehrn explained at the same conference that outflows were acute in October, and then gradually decreased in November and December.

This contradicts the December narrative of Credit Suisse chairman Axel Lehmann when he said outflows had stopped. Still, in March, Finma saw no reason to open a supervisory procedure because of his comments. This incident too will need to be examined through a different lens in light of today's revelations.

Another 100 Billion, Gone

Although Finma seemingly turned a blind eye, it didn't help Lehmann and Credit Suisse all that much. A week and a half later, UBS took over Credit Suisse after it ran into such severe liquidity problems due to the market uncertainties stemming from the US that it would not have survived another day. According to the Finma director, in mid-March Credit Suisse experienced outflows of a magnitude similar to those in the fourth quarter, especially in its home market of Switzerland. Counterparties withdrew financing or were only willing to grant it at much higher conditions.

It was at that point the committee comprised of the Federal Department of Finance (FDF), Finma, and the Swiss National Bank (SNB), led by Federal Councillor Karin Keller-Sutter, Marlene Amstad, and SNB President Thomas Jordan, realized that Credit Suisse could not be saved, Angehrn recalled. «That's when everyone involved knew. We had to act. And act we did.»

A Solution to Live With

It was necessary not only to save the day but also to live with the solution. The committee opted for the rescue with the takeover by UBS. Credit Suisse was already preparing for a sale last fall, and «it is customary to ask an institution to do everything possible to make a potential sale possible as well. In each case, it is up to the bank itself to evaluate possible buyers,» Amstad said.

Credit Suisse turned into a zombie in the fall and became a «dead bank walking» as described by the Swiss daily «NZZ» (in German, behind paywall). 

UBS chairman Colm Kelleher summed it up on March 19: «Frankly, we hoped today would never come.»