Credit Suisse lingers still. Why?

If G-SIBs were a gentlemen’s club rather than a category invented by the Basel-based Financial Stability Board, Credit Suisse would have been kicked down the front steps months ago. G-SIBs are the thirty “global systemically important banks” and even within that list, Credit Suisse counted among those with the lowest “required levels of addition capital buffers”: in short, regulators considered it rock-solid.

But that was a judgment on its end-2021 balance sheet, not its management. Credit Suisse has been so badly run for so long — so riven by tension between the dull Swiss wealth business it ought to have been and the global player it imagined itself to be — that some of us wondered how it survived. “Pour encourager les autres,” I wrote eighteen months ago, wouldn’t it be better “to move the depositors to a safer bank and close the repeat offender down?”

That’s pretty much what happened in the forced merger with UBS last weekend. It surprised no one in the know and was not provoked, as Silicon Valley Bank’s fall was, by rising interest rates. Irrational market fear underpinned both events but in Credit Suisse’s case, rational analysis said the bank was a basket-case. The last straw was a $5.5 billion loss, blamed internally on “fundamental failure of management and controls,” in derivatives dealings with Archegos Capital Management in New York which could only ever have delivered paltry returns to the bank: high-risk-low-margin business catastrophically handled.

Credit Suisse’s fate should have been decisively resolved by the Swiss authorities and the bank’s own board last fall, when its shares were in freefall and client funds were fleeing. Allowing it to linger has harmed confidence in the entire European banking sector. But ejection from the G-SIB club might not have been enough: in the old-fashioned way, Credit Suisse should have done the decent thing. I’m reminded of an immortal line from a clubman in a Dorothy L. Sayers novel: “I say, you fellows… here’s another unpleasantness. Penberthy’s  shot himself in the library. People ought to have more consideration for the members.”

This article was originally published in The Spectator’s UK magazine. Subscribe to the World edition here.