Culture of Secrecy and Mistrust Hampered Swiss Response to Credit Suisse Collapse, Report Reveals

An inquiry into the collapse of Credit Suisse in 2023 has exposed a culture of secrecy, mistrust among officials, and efforts to minimize the bank’s troubles, which significantly impaired Switzerland’s response to the crisis. The findings, detailed in a 560-page report by Swiss lawmakers, paint a picture of disarray within the government as the country grappled with the implosion of its second-largest bank.

The collapse, a watershed moment for Swiss banking, tarnished Switzerland’s reputation as a premier global financial hub and challenged the notion that major banks are now more secure or that governments are adequately prepared to handle such crises.

At the heart of the inquiry’s revelations is the “culture of secrecy” that permeates both Switzerland’s financial industry and its government. Lawmakers uncovered a series of so-called “non-meetings” where officials discussed the looming collapse informally and without documentation. These secretive practices, driven by fears of leaks, left key government ministers uninformed and undermined preparations for the eventual state-backed rescue and sale of Credit Suisse to UBS.

Thomas Jordan, the former president of the Swiss National Bank, was singled out for his reliance on such non-meetings as he scrambled to avert a financial disaster and orchestrated the controversial merger of Credit Suisse with UBS. Similarly, Ueli Maurer, the former Swiss finance minister, favored informal discussions that went undocumented.

The lack of written records created significant friction within the government. One notable incident occurred in early November 2022, when the Swiss president and the chancellor—both senior officials—were unable to obtain the necessary documents on the bank’s worsening situation due to the finance ministry’s concerns over leaks. This left them in the dark during a critical phase of the crisis.

When the president eventually contacted Maurer to express concerns, he was reassured that “the situation at CS (Credit Suisse) had calmed somewhat and one must avoid creating any upset.” Despite this reassurance, Maurer later briefed the cabinet on the bank’s challenges, triggering demands from officials for written information about potential interventions.

In one instance, Maurer and Jordan held an undocumented meeting with then-Credit Suisse chairman Axel Lehmann to discuss a possible sale of the bank. Lawmakers noted they were unable to reconstruct precisely what transpired during these discussions due to the lack of records.

The report highlighted Lehmann’s apparent optimism in his meetings with officials, even as the bank hemorrhaged tens of billions of dollars in late 2022. It also shed light on Marlene Amstad, chair of the Swiss financial regulator FINMA, who was frequently excluded from these discussions. Amstad was critical of the informal practices that left her and other key players sidelined.

The opacity extended to media messaging. In a December 2022 interview on Swiss television, Maurer appeared dismissive of the crisis, stating, “You just have to leave them alone for a year or two.” Such comments were out of sync with the escalating severity of the situation.

Although Maurer’s successor, Karin Keller-Sutter, discontinued the practice of informal meetings, the fear of leaks remained pervasive. It wasn’t until February 2023 that Switzerland’s seven-member cabinet received formal documentation outlining plans to address the bank’s crisis.

By March 2023, Credit Suisse was teetering on the brink of collapse. The Swiss government orchestrated a state-backed sale of the bank to UBS in a desperate bid to prevent a chaotic unraveling of the financial giant.

The parliamentary report, based on interviews and available records, underscores the challenges posed by Switzerland’s entrenched culture of discretion. Lawmakers could not determine the full extent of the secretive meetings or their precise contents. However, the inquiry has illuminated the dangers of such practices, which left officials ill-prepared for one of the most significant crises in Swiss financial history.

By fLEXI tEAM