Credit Suisse. A Basket Case or a Repeat Offending Criminal?

Credit Suisse known known globally as one of the systemically most important thirty banks has just been bailed out 2008 style, showing it up as a tottering house of cards. This is 2023 and not 2008 but led by Credit Suisse the banks are tottering again. The question is, is Credit Suisse a basket case or a repeat offending criminal outfit? If it is a repeat offending criminal entity, what does that say about the rest of Europe’s and the worlds banks? Credit Suisse has been regarded by the rest of the banking world as a venerable institution to be looked up to and emulated. Does their record confirm this? Ask yourself the following questions.

• What kind of a bank repeatedly and knowingly allows cocaine dealers, criminals, and kleptomanocrats to do business with it?
• What kind of bank hides the stolen assets of the world’s crooks under assumed or false identities?
• Is that the kind of bank a respectable company does business with?
• Is that the type of outfit you would want to be seen doing business with?

That is Credit Suisse and it was about to go bust until the Swiss National Bank, at lightning speed, provided it with ‘an emergency loan’ commonly known in layman’s terms as a bailout of 50 billion Swiss francs ($54 billion).

Central banks, banking regulators and national treasuries rescue big banks such as Credit Suisse in fear of the tsunami of destruction that ‘Too Big to Fail’ banks can cause around the globe. Remember the dreaded Troika.

Long History of Dodgy Dealing

On Tuesday March 14^th, Credit Suisse in a typical banking understatement announced or admitted to significant weaknesses in its financial reporting in both 2021 and 2022. In layman’s terms, that means they they finally had to admit that they had been lying all along because they could no longer hide the extent to their problems. This is far from the only time that Credit Suisse has exposed itself to seriously dodgy dealings, operational risks, short practices, management problems, employee problems, processes problems, technology problems and untruthful reporting.

The Credit Suisse Rap Sheet

In their February 2022 article in the ‘The Guardian’, entitled Crooks, Kleptocrats, and Crises, Kalyeena Makortoff and David Pegg highlighted Credit Suisse’s ‘rap sheet’ that reads like a ‘Mafia rap sheet’ or that of an international crime ring. The following is a sampling.

• 1986: Credit Suisse helped Ferdinand and Imelda Marcos to deposit the funds they had stolen from the Philippine’s and hid in Credit Suisse accounts under false identities.
• 1999: “Shredding Party”– Japanese authorities fined Credit Suisse for destroying evidence in a major investigation
• 2000: Banking stolen funds for a Nigerian dictator
• 2004: Money laundering for a Japanese crime gang
• 2009: Fined for breaching U.S. sanctions against Iran and Sudan between 1995 -2007
• 2011: Taxevasion probes facilitating 1,100 Germans with accounts at Credit Suisse
• 2012: Credit Suisse bankers fraudulently overstated the price of mortgage-backed securities based on subprime loans
• 2014: Facilitating Americans to evade taxes
• 2016: Facilitating Italians to evade taxes
• 2016: Anti-money laundering fine in the U.S. for money laundering activities.
• 2017: Anti-money laundering fine for the bank’s role in 1Malaysia Development Berhad
• 2017: European tax evasion
• 2018: Weak controls linked to dealings with oil companies Petrobras, PDVSA and FIFA
• 2018: Fraud involving former Georgian prime minister
• 2018: Jobs for business scandal in Hong Kong and China
• 2019: Corporate espionage
• 2020: Opened banking accounts for Bulgarian cocaine traffickers
• 2021: Archegos collapse
• 2021: Greensill Capital scandal in the U.K.
• 2021: Mozambique tuna-bond scandal
• 2022: Under investigation for possible ties to Russian oligarchs
• 2023: Material weaknesses in financial reporting

Only a bank or a pharmaceutical company could hope to get away with such crookery. Would you trust an outfit with a ‘rap sheet’ like that with your money?

Credit Suisse Warning Symptoms

Market concerns and downright displeasure with the cavalier carryon of Credit Suisse has been growing since 2021.

• Since its most recent peak of $14.45 on February 26^th of 2021, Credit Suisse’s stock has fallen by more than 85% to $2.16 on the March 15^th close of business.
• Since February of 2021, Credit Suisse’s stock price has crashed by 600%.
• Both Fitch and Moody’s have downgraded Credit Suisse in 2022 and have further designated it with a negative ratings outlook.
• Credit Suisse has a negative rating outlook with two of the three global rating agencies.
• Credit Suisse’s present Liquidity Coverage Ratio is claimed to be 150%, which should indicate liquid security in the case of significant credit and market stresses. If that were true, Credit Suisse would have enough liquidity to cover stressed cash outflows without outside intervention.
• If that figure is correct, it begs the question, why did Credit Suisse have to run with a begging bowl for a bail out to the Swiss National Bank? Nobody in the relevant authorities are publicly asking that question. One wonders why.

Preventing Credit Suisse Contagion

Preventing a Credit Suisse crash with the risk of contagion would involve coordinated crisis control measures between multiple regulators and central banks around the world.

• Key players around the world should be cooperating right now to prevent contagion if Credit Suisse were to fail because all the countries it is involved in would experience a major shock. This is because of their exposure to its asset size, the complexity of its interconnection to other G-SIB’s, where multinational corporations and even governments would experience major exposure problems.
• Credit Suisse’s stated asset size of more than $800 billion is equal to the size of the Switzerland’s entire GDP.
• The markets are nervous to the point of panic about the Swiss regulators ability rescue or resolve the Credit Suisse crisis which is pressuring the Swiss Franc and the entire Swiss economy.
• Swiss government yields are demonstrating Switzerland’s vulnerability. The country would be in serious trouble if it had to bailout Credit Suisse.
• Switzerland’s very survival is contingent on the viability of its enormous banks.
• If Credit Suisse were to fail, it would result in an international financial and monetary nightmare because Credit Suisse has tentacles of hundreds of legal entities and more than 150 offices in over 50 countries.

Principal Legal Entities January 2023

Credit Suisse comprises of:

1. insured depositary banks,
2. broker dealers,
3. and asset managers to name but a few.

All of the above are regulated in different countries by different central banks and securities regulators all with different rules. Therefore, to resolve Credit Suisse’s international web of potentially explosive nightmares, it would require all the different regulators to engage in serious cooperation. Globalism doesn’t appear to be such a wonderful prospect after all.

U.S. Governance and Liquidity Weakness

Credit Suisse is regulated in the U.S. by the Federal Reserve where title I of the Dodd-Frank Act requires Credit Suisse to submit a bank resolution plan in the case of a crisis. This is generally referred to as ‘a living will’. It applies only to legal entities operating in the U.S., detailing with what internal and external factors could possibly cause the bank to fail and what measures would be required to resolve it. While the contents of the plan are confidential the ‘Executive Summary’ is available to the public.

U.S. Warnings Without Corrective Action

By the end of 2022, both the Fed and the FDIC or Federal Deposit Insurance Corporation warned that:

• Credit Suisse’s ‘living will’ showed up resolution planning governance deficiencies. “The Agencies jointly identified a deficiency regarding Credit Suisse’s resolution planning governance that resulted in an insufficient 2021 Targeted Plan. The Agencies were unable to assess the feasibility of Credit Suisse’s resolution plan, including whether it would facilitate an orderly resolution under the U.S. Bankruptcy Code, because the plan lacked necessary information and adequate detail.”
• The regulators also stated that “another significant weakness is related to a shortcoming finding made by the Agencies regarding the 2018 Plan concerning Credit Suisse’s model and process for estimating the liquidity needed to fund its U.S. material entities during a resolution”
• The regulators also found that “The 2021 Targeted Plan’s poor quality and lack of content as well as outstanding concerns related to cash-flow forecasting referenced above call into question the sufficiency of the firm’s governance for its U.S. resolution planning process and raise questions about the feasibility of Credit Suisse’s U.S. resolution plan.”
• The “Agencies also jointly identified a deficiency regarding the firm’s cash-flow forecasting capabilities. The 2018 Letter described weaknesses related to Credit Suisse’s cash-flow forecasts as part of the 2018 Liquidity Shortcoming. The 2018 Letter also specified a series of enhancement initiatives that the firm should complete. Based upon their review of the 2020 Plan, the Agencies concluded that Credit Suisse adequately addressed the 2018 Liquidity Shortcoming. This conclusion was communicated to the firm in the 2020 Letter.”

Despite all the visible warning signs neither the Fed nor the FDIC had the balls or the backbone to do anything about the state of Credit Suisse. Two hot to handle together with the hackneyed phrase or ‘too big to fail’ comes to mind.

Nothing to See Here

Meanwhile Wall St. has pledged billions of dollars to rescue California’s San Francisco-based First Republic Bank as Credit Suisse started to breathe again.

• Major US banks have deposited $30bn in San Francisco-based First Republic Bank to save First Republic and bolster the crumbling banking system.
• A rescue consortium consisting of Bank of America, Wells Fargo, Citigroup, and JP Morgan have pledged approximately $20 billion.
• Goldman Sachs and Morgan Stanley have pledged an additional $5 billion.
• Truist, PNC, US Bancorp, State Street, and Bank of New York Mellon will come up with around $1bn each.

On Thursday morning March 16^th, U.S. Treasury Secretary Janet Yellen told the U.S. Senate Finance Committee that the US banking system remains sound and Americans can feel confident their money will be there when needed. Would all this rescue activity and Yellen’s reassurance be necessary if the banking system was sound?

Corpses on Life Support

To date no bank of Credit Suisse’s size has ever failed or rather been allowed to fail, although in their imploding system, many of them are no healthier than corpses on life support. On Thursday morning, as First Republic Bank was being rescued, the for now rescued Credit Suisse’s stock rose or was pumped up, somewhat calming the panicky markets. That doesn’t mean, by a long shot, that Credit Suisse’s major problems or those of other tottering banks have been solved. Credit Suisse and First Republic are still on life support and the long term prognosis is not good with the high risk of contagion throughout the worlds corporate banking sector leading to a possible collapse of a system that has outlived its usefulness.

A Must Read for You

Coming up next on Monday March 20^th in the Irish People we expose for you the “Repeated Banking Crises History” where we will list the sorry history of the carnage caused by repeated bank crashes and why you should never trust any bank. Be warned and don’t be a banking victim. Be sure to read it.

IrishPeople.ie