How scandal and mistrust ended Credit Suisse’s 166-year run

Before the global financial crisis — which Credit Suisse survived without a bailout, unlike many of its peers — the Swiss lender had more than US$1 trillion in assets, but after years of decay, they’ve dwindled to about US$580 billion, roughly half of UBS’s.

But in its hometown of Zurich, doubts and frustration were growing. Outside its headquarters on the stately Paradeplatz, someone scrawled: “The next bank to go bye bye?” That question was later replaced by expressions of anger and disgust as reality gradually set in. First Boston had embraced high-yield debt markets during the 1980s and lent billions of dollars to fund risky buyout transactions. The once-lucrative industry had imploded, and one of the most problematic deals was a US$457-million loan for the leveraged buyout of Ohio Mattress Co. The failed financing would go down in Wall Street infamy as “the burning bed.”

As long as money was flowing, the bank indulged Lescaudron’s bad behaviour, according to an independent investigation commissioned by Finma, the Swiss banking regulator, though it stopped short of concluding that the bank knew of the fraud.In January 2019, a long-festering feud between then-CEO Tidjane Thiam and Iqbal Khan, who ran wealth management and had his sights set on one day leading Credit Suisse, broke out into the open at a dinner in a wealthy suburb on Lake Zurich.

As part of an investigation prompted by the Khan episode, the Swiss banking regulator in October 2021 uncovered five additional cases of surveillance from 2016 to 2019. The toxic atmosphere at the top contributed to damaging operational missteps.In March 2021, Credit Suisse’s trading desk was informed that its biggest client wouldn’t be able to pay the more than US$2 billion it owed the next day.

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