The extent of the panic centred on Credit Suisse at the height of the biggest financial crisis since 2008 was revealed today, as it reported £55 billion ($68 billion) in capital outflows for the first three months of 2023.
Account holders and wealth management customers are also still scrambling to get their cash out, according to what will be one of the last set of quarterly results from the 167-year old lender before a government-brokered merger with arch rival UBS.
As it revealed the extent of the bank run today, Credit Suisse called the outflows “significant … in particular in the second half of March 2023”. It added: “These outflows have moderated but have not yet reversed”.
A series of mis-steps and scandals left it struggling with people closing accounts even before shockwaves were sent through the global banking sector by fears about the impact of a slide in the value of government bonds.
That turbulence claimed Silicon Valley Bank in the US and then prompted an industry rescue of a string of regional American lenders, sending fears about contagion from the bond slide rippling through the industry.
Credit Suisse was badly exposed and was to become the biggest name in finance to fall since the 2008 financial crisis. Its demise has stoked fears of job losses in the City. Credit Suisse employs around 5,000 people in London at Canary Wharf, while UBS has 6,000 mostly at the Broadgate Centre in the square mile.
UBS is expected to take the axe to Credit Suisse’s investment bank, which has a reputation in the City for being more prone to take risk than its incoming owners.
Colm Kelleher, UBS’s chairman, said in late March that “there are clearly parts of Credit Suisse that have a bad culture,” adding: “Primarily, that was focused on the investment bank…We need to put everybody through a culture filter to make sure we don’t import something into the eco- system that causes issues.”
Even a backstop for from Switzerland’s central bank was not enough to stop the March bank run as fear took hold of the sector. Credit Suisse said today that it had net borrowings worth $121, or 108 billion Swiss francs, under the terms of that scheme.
The £2.5 billion shotgun marriage came as a major blow to the reputation of the financial services industry in a country once world famous for the safety of its banks.
Around $17 billion in one form of debt held by Credit Suisse, known as core AT1 bonds, was wiped out by the terms of the deal, with lawsuits from lenders expected to follow.
The merger is expected to close by the end of this year if at all possible, with the speed of the transaction taking company insiders and the wider industry by surprise.
