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Credit Suisse was once a Swiss national treasure. Now it's a cautionary tale

AILSA CHANG, HOST:

We often air obituaries of world leaders, celebrities and other people on NPR. But today we bring you an obituary of a bank. Earlier this week, Credit Suisse was purchased by its Swiss rival, UBS, ending a 166-year tradition of banking. NPR's Rob Schmitz has this eulogy.

ROB SCHMITZ, BYLINE: On its web page, Credit Suisse says it's been entrepreneurial from the start.

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UNIDENTIFIED PERSON: Entrepreneurs don't ask why. We ask, why not?

SCHMITZ: That is apparently what politician and business leader Alfred Escher asked in 1856, when the government of Switzerland approached him to help finance the expansion of the national railroad. He asked, why not? And Credit Suisse was born.

MARIO BABIC: And that really led to a transformation of Switzerland into an industrial economy and also opened it up to trade.

SCHMITZ: Mario Babic is editor of FIN News and has covered Credit Suisse from his perch in Zurich for years. He says Credit Suisse's history is enmeshed with Swiss history. The bank was long considered a national treasure with a great reputation, a leader in European finance. But things started to change, says Babic, when the bank took a controlling stake in First Boston, an investment bank, in 1988.

BABIC: That might be a bit of a demarcation of sorts where it went into the more traditional American-style investment banking.

SCHMITZ: With that deal, says Babic, Credit Suisse gradually strayed from its roots as a well-trusted bank specializing in wealth management to a bank increasingly focused on bigger and riskier investments and profits.

BABIC: It became a much more international bank that had gotten away from what people might consider as the safe and boring type of Swiss bank.

SCHMITZ: And instead of safe and boring, Credit Suisse became a bank, as its advertising suggests, that instead of evaluating risk and asking why...

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED PERSON: We ask, why not?

SCHMITZ: Ten years ago, Credit Suisse asked why not to a deal in Mozambique to develop the fishing industry, but hundreds of millions of dollars went missing. The bank was accused of bribery. The IMF withdrew its support, and it left a currency and debt crisis in one of Africa's poorest countries in its wake. In 2020, a former CEO of the bank resigned in the wake of a scandal where the bank spied on a former head of wealth management. Last year, a former bank employee was sentenced to prison for helping a Bulgarian cocaine trafficking cartel launder its money. Since 2000, Credit Suisse has been fined by regulators for a total of $11.4 billion, nearly four times what UBS paid to acquire it.

JESSE GRIFFITHS: So it was a bad bank or a bank that had had problems.

SCHMITZ: Jesse Griffiths is CEO of The Finance Innovation Lab.

GRIFFITHS: And it was that perception that led it to become one of the first ones that people started worrying about when the confidence in the whole system was shaken by the collapse of Silicon Valley Bank.

SCHMITZ: Griffiths says under normal circumstances, Credit Suisse, despite its problems, would have survived.

GRIFFITHS: It's just that when confidence drains from the system, any bank that is not very sound can become a target.

SCHMITZ: Griffiths blames a bank regulatory system that was weakened under President Trump, eliminating the need for bank stress tests and liquidity requirements. Looking forward, economist Tinatin Akhvlediani says better regulation would help boost investor confidence, which in turn would save future banks from a similar demise.

TINATIN AKHVLEDIANI: So better, stricter regulations is really, really key, key attention to the confidence because once it's compromised, I think it's very, very difficult to just repair it. And then the critical moment comes, and then it's all just blown away.

SCHMITZ: And for Credit Suisse and so many other banks, that critical moment has arrived. Rob Schmitz, NPR News, Berlin. Transcript provided by NPR, Copyright NPR.

Rob Schmitz is NPR's international correspondent based in Berlin, where he covers the human stories of a vast region reckoning with its past while it tries to guide the world toward a brighter future. From his base in the heart of Europe, Schmitz has covered Germany's levelheaded management of the COVID-19 pandemic, the rise of right-wing nationalist politics in Poland and creeping Chinese government influence inside the Czech Republic.