With the demise of Credit Suisse, the Swiss economy is losing diversity, as it did when other major Swiss banks disappeared.

Credit Suisse is now history and the brand won't exist in two years, making Switzerland less culturally diverse. Every major bank that has existed in the country embodied a certain degree of national identity.

At the end of the Second World War, there were seven major banks in Switzerland: Union Bank of Switzerland (UBS), Swiss Bank Corporation (SBC), Schweizerische Kreditanstalt (SKA, later Credit Suisse), Schweizerische Volksbank (SVB), Bank Leu, Eidgenoessische Bank (Eiba) and Basler Handelsbank.

Expanding Too Briskly

The latter two banks disappeared shortly after the war. They'd been doomed because, in the 1930s, they diversified by orienting themselves primarily toward Germany. As a consequence of the crisis between 1931 and 1936 and the capitulation of Nazi Germany, payments for the loans granted by the two banks failed to materialize.

Basler Handelsbank was swallowed up by its local rival, SBC, and used as a clearing house for blocked credit balances. SBC took over Eiba and continued using it as a holding and finance company, reducing the number of major Swiss banks to five. At the same time, two non-Zurich based banks disappeared. They were locally anchored but later doomed by over-aggressive expansion abroad.

Switzerland's Oldest Major Bank

It was several decades before the next major institution disappeared. Zurich-based Bank Leu, founded in 1754, was the oldest Swiss bank at the time, and where Zurich's wealth of private individuals, guilds, companies, and firms seeking to invest abroad banked. Its long history was one of constant ups and downs, which led it into retail banking, ending in a takeover by what is today Credit Suisse.

Increasing domestic competition in an industry moving away from the price-fixing common in the past and towards liberalization of business, and lack of internationalization led to its undoing. What was possibly Switzerland's most distinguished major bank was lost, the name living on through Leu Holding and eventually Clariden Leu. Credit Suisse neither succeeded in establishing it independently nor as a successful subsidiary, eventually integrating it in 2012.

SBG and SKA Takeover Battle

Another major bank disappeared in the 1990s. «Volksbank von Bern,» later Schweizerische Volksbank, was founded in 1869 by representatives from labor, civil service, and trade unions. In the early 1980s, it came under pressure from high losses on silver futures. This was compounded by a real estate crisis in Switzerland, which led to write-downs the bank could no longer absorb.

This led to a fierce takeover battle between SBG and SKA, which later became Credit Suisse and the ultimate winner. Promises the SVB brand would be preserved soon turned out to be empty.

Healthy Competition

And then there were Three. There was healthy competition among those left standing, especially since they were culturally different. UBS was considered the undisputed number one; structured, process-oriented, military organization.

Perhaps due to this, it lacked the ability for innovation which was SBCs hallmark. Its early ventures abroad gave it proximity to the latest developments in the international financial world, especially in trading.

Credit Suisse, reformed after the 1977 Chiasso Scandal under chairman Rainer E. Gut, positioned itself as an entrepreneurial bank and harbored ever greater investment banking ambitions in the US, which ultimately never paid off.

Ominous Call

That this three-legged banking stool was wobbly became apparent in April 1996, when  Gut called his competitor Nikolaus Senn at UBS and proposed a merger. Senn, with a wounded self-image and corporate pride, immediately rejected the overture.

But it only took two years before SBC merged with SBG. In the course of the 1990s, SBC, spoiled by its success, mutated into a well-capitalized but sluggish colossus running out of prospects in an increasingly globalized world. By contrast, SBC proved to be an innovative firm under Marcel Ospel in particular, that was so competitive it was running out of financial resources. A merger made economic sense.

From Success Into Crisis

And so UBS was born from the merger of SBA and SBC. It proved to be an enormous cultural challenge because initially the SBC under Ospel was able to assert itself more, and proved to be the successful model for the Swiss financial industry. However, the bank speculated heavily and badly throughout the financial crisis that it had to be rescued by the federal government in the fall of 2008.

Under pressure to reorganize and the departure of the former SBC guard under Ospel, UBS fell back on its process-oriented approach while loosening the military structure. The main architects of this were Sergio Ermotti, who introduced a lower-risk strategy focused on asset management, and former German Bundesbank president Axel Weber, who gave the institute gravitas. That ultimately laid the foundation that made it possible for UBS to take over Credit Suisse.

Bad for Entrepreneurs

It's not without a certain irony that Credit Suisse came through the 2008 financial crisis with aplomb, but was subsequently unable to build on that success, instead ruining itself due to negligence, hubris, and incompetence. The disappearance of another major Swiss bank isn't unique, as nearly 80 years of history shows.

Still, another piece of economic and cultural heritage is now being lost. For entrepreneurs, which is what Credit Suisse stood for, it's unfortunate they can longer choose between two providers.

End of Alfred Escher Culture

With Credit Suisse to be fully integrated into UBS, the last Swiss counterweight to UBS culture will be lost. Although suffering from poor risk awareness, it had loyal and pragmatic entrepreneurial thinkers with the pedigree of the «Alfred Escher Bank,» where they could use that expertise more than at other institutions.

That era is now over because not everyone from Credit Suisse will join UBS, but also because UBS has its own culture.

UBS is now the last bank standing.