For years, no standing board chair has managed to stop the rot at Switzerland's second-largest bank. Why is that?
It is safe to say that Urs Rohner's term as the former Credit Suisse chairman didn't take anyone's breath away. That much is now recognized in Swiss financial circles. For too long, he simply stood by, doing little to prevent the bank from progressively falling apart.
Instead, he cashed in and surrounded himself with an incompetent board. «A fish rots from the head down» has become a common retort when Zurich bank managers are asked about the main reason for the downfall of a once proud bank.
Empty Phrases
Rohner is now history, as is his immediate successor António Horta-Osório. The highly celebrated Portuguese landed on Paradeplatz as this unrivaled turnaround banker, a fresh knighthood from the Queen in hand. He ended up doing little more than muttering obscure phrases about ideal corporate governance. Until he was found out for not following rules himself when it became public he had breached the then Covid-19 isolation rules not once, but several times.
That left Credit Suisse, already increasingly adrift, looking for another chairman after just ten months. Axel Lehmann, a Swiss citizen, eventually took the bank's scepter in hand. At first, he exuded a down-to-earth seriosity and competence. He installed Ulrich Körner as CEO and bid a hapless Thomas Gottstein goodbye. Finally, the bank seemed to have what seemed like an optimal leadership team.
Thoughtless Statements
Not even close. Since last summer, the bank has faced one crisis after another. When it comes to communication, the chairman seems to be sitting right in the middle of it all.
An example. His thoughtless statement last December that the bank had managed to stop client outflows. Only a few weeks later they were revealed to be untrue, leading to an investigation by the Swiss Financial Supervisory Authority (Finma). It was not the first time that something like that happened.
Private Jet to London
In late summer, he seemed to believe in all seriousness that the crisis-ridden bank could say or do nothing publicly until a strategy update scheduled for 27 October. What was the result? A bunch of self-appointed financial experts on social media predicted either imminent insolvency, the bank's demise, or a mix of both.
He also showed little sense at the event itself as it was held in London instead of Switzerland. Internally, there was very little sympathy with a Credit Suisse executive flying a private jet there, particularly how the bank was sharply cutting costs, and doing so in a way that had seldom been seen before.
Little Empathy
There are indeed many Credit Suisse analysts based in London. But given today's digital technologies, it might have been a good idea to hold it in Switzerland given its domestic importance and in consideration of how it seems to be increasingly becoming detached from its original, Swiss roots, something that was emphatically underlined by the recent investment from a new major Saudi Arabian shareholder.
At the strategy update, Credit Suisse indicated that it would cut about 9,000 jobs, something that triggered deep uncertainty in the workforce and hurt office morale. Lehmann then appeared a few weeks later at the World Cup in Doha with his new Qatar shareholders. That might be reasonable from a business perspective. At the same time, it shows little empathy for all the employees fighting to keep their jobs.
Undecipherable Investors
It is pointless to rack one's brains over whether Lehmann was naive, insensitive, or even negligent. The only fact out there is that Credit Suisse shares fell to a new, record low last week, something that has rendered most in the Zurich financial hub speechless. It just gives everyone the impression there is some kind of curse on all the former and present chairs of the bank, and something that has led many to feel a sense of almost complete hopelessness.
Until now, Lehmann has not managed to put a credible turnaround strategy on the table. In the meantime, the bank is not only fighting an image problem with its hard-to-read Saudi Arabian investors. As clients increasingly lose trust, the problems are starting to affect the once-solid Swiss business and its global wealth management franchise.
Shrewd Wall Street Bankers
In parallel, long-tenured executives are leaving in droves as the Credit Suisse management team grows increasingly dependent on a shrewd Wall Street banker who goes by the name of Michael Klein. It is also disturbing how much money from Russia is still at the bank. Even the usually restrained Swiss business newspaper «Finanz und Wirtschaft» (German only, paywall) has managed to arrive at a relatively emphatic conclusion: «CEO Ulrich Körner and Chairman Axel Lehmann Have Turned the Bank into a Poisonous Cocktail.»
The alarm bells should be ringing throughout Switzerland about the desolate situation the country's second-largest bank finds itself in. But nothing is happening. Neither the government in Berne nor domestic business circles are doing anything to prevent the worst from happening. It is becoming increasingly reminiscent of Swissair's collapse. But Credit Suisse's situation today is far more dramatic. It is not an airline, but one of the five system-relevant financial institutions in
the country.
Co-ordinated Steps
It does go against market principles when a sovereign authority interferes in commercial enterprise. After UBS's near collapse in 2008, plans were put in place to ensure payment flows and secure lending portfolios. But sweeping, coordinated steps are needed by the government, Finma, and the Swiss National Bank (SNB) given the complete hopelessness the bank now finds itself in.
«Strong words are likely needed from the government to stop this (the bleeding). The Saudi Arabian investors are unlikely to do so, as they are too closely connected to the bank», indicated the Swiss weekend newspaper «Sonntagszeitung» recently (German only, paywall).
Accelerating Decline
Such words are needed now more than ever given that neither Rohner, Horta-Osório, or Lehmann have managed in the slightest to stop the bank's accelerating, intensifying decline.
