The fall of Credit Suisse

 Credit Suisse, once the second-largest Swiss bank with over a trillion dollars in deposits, has experienced a significant decline. In 2005, its assets were 1.3 trillion CHF, decreasing to 800 billion in 2020 and further to 531 billion CHF in 2022. The loss of confidence is attributed not only to the impact of Covid and the banking crisis but also to pre-existing issues.

Despite the profitability of its four main branches—Wealth Management, Asset Management, Investment Banking, and Swiss Banking—Credit Suisse faced challenges before the pandemic. Apart from the financial difficulties, the bank was entangled in scandals. Notably, it was accused, found guilty, and fined for its involvement in money laundering linked to a Bulgarian drugs ring.. 

links to scandals

Credit Suisse fined $2.5 billion after pleading guilty to U.S. tax charge

scandals  

These scandals ruined the perception of the bank and they were facing many legal troubles and the bank had to pay a lot of money in litigation fees

The decline of Credit Suisse was further exacerbated by the troubles faced by Archegos Capital Management and Greensill Capital, both of which had ties to the bank. When Greensill Capital funds, amounting to 10 billion dollars, were frozen, frustrated investors began withdrawing their funds from the bank. In the fourth quarter of 2021, the bank's assets stood at over 740 billion CHF, but by 2022, this figure had dropped to 540 billion. The impact on revenues from asset management was significant.

With a deteriorating general perception of Credit Suisse and growing concerns, depositors increasingly withdrew their funds from the bank. 

Credit Suisse CDS prices in comparison to other banks were also very high.If a bank has higher Credit Default Swap (CDS) prices, it's like saying the market believes there's a greater chance the bank might struggle to repay its debts. This could be due to worries about the bank's financial health or concerns about economic conditions. Essentially, higher CDS prices signal that investors are more cautious about the bank's ability to handle its financial commitments. 

Credit Suisse encountered further challenges as its net income for all quarters in 2022 turned negative. The situation worsened with a significant setback in the financial markets in 2023, marked by the downfall of several US banks, including SVB. This triggered panic among depositors, prompting them to withdraw their funds from Credit Suisse. Concurrently, the stock prices of Credit Suisse experienced a sharp decline, instilling fear among its depositors.

The ultimate downfall of Credit Suisse can be attributed to a combination of scandals, heightened media attention, and the subsequent erosion of confidence in the bank.