Now it’s official: In order to save Credit Suisse, the major bank is being bought by UBS.Image: www.imago-images.de / Andreas Haas
Business
Credit Suisse (CS) is history. The Finma President and the CS President agree that rumors on social media were said to have caused the death knell. They are criticized for that.
21.03.2023, 08:2021.03.2023, 08:21
Kilian Marti / watson.ch
Man masters self-deception even better than lies, as the Russian writer Fyodor Mikhailovich Dostoyevsky aptly stated. In the drama about the collapse of Credit Suisse (CS) they both played the leading roles – self-deception and lies.
Rumors and lies on social media are said to have definitely rung the death knell of the big bank. CS President Axel Lehmann and Marlene Amstad, President of the Board of Directors of the Swiss Financial Market Supervisory Authority (Finma), agree on this. Both lead this to the Media conference of the Swiss Federal Council off on Sunday.
But they left out the roles played by the two actors themselves in this play – and thereby deceived themselves. CS and Finma are among the big losers of the historic weekend, as the news agency “Bloomberg” summarized.
Rumors led to historical outflow
The Swiss supervisory authority is the only one in the world that has had to watch the collapse of a systemically important bank since the financial crisis. Everything took its course last autumn, explained Finma President Marlene Amstad at the media conference.
Observed the collapse of CS: Finma President Marlene Amstad.Image: KEYSTONE / Peter Klaunzer
“Since October 2022, rumors triggered on social media led to massive outflows of customer deposits at CS,” Amstad said. In terms of capital and liquidity, the bank “nevertheless (!) always met the minimum regulatory requirements”. – even after Finma increased them after the capital outflows.
Amstad notes that CS also held more liquidity than required. As a result, the bank ensured that it was “ able to absorb the historically high outflows”.
The Finma President emphasizes: “Although the fundamentals were basically in order, trust was increasingly lost.” The great fear of another financial crisis combined with the rumors then led to a negative spiral, which represented the beginning of the end of CS.
“The camel’s last straw”
Axel Lehmann, to date Chairman of the Board of Directors of the Credit Suisse Group, blows the same horn when asked at the media conference who is now responsible for the disaster at CS.
Looking backwards and pointing your finger somewhere is “always easy,” Lehmann explained. The bank has been caught up in legacy issues, including the bankruptcies of US hedge fund Archegos and Australian finance company Greensill. This had led to a loss of billions. The CS President noted that despite these headlines, customers remained loyal to the bank. Until the past Herbst.
Explains the reasons for the CS misery: Chairman of the Board of Directors Axel Lehmann.Image: KEYSTONE / Peter Klaunzer
“The Social Media (Shit) Storm had a huge impact. Too much can suddenly be too much. Cumulatively with all the things that have built up over the years, that was the straw that broke the camel’s back,” said Axel Lehmann took over a year ago.
“Too much can suddenly be too much”
Axel Lehmann, CS President
The statements by the bank and Finma are now causing reactions on social media. It is self-deception to blame the collapse of CS on the lies and rumors on social media. The tenor is: no trace of self-criticism. But which rumors are Finma and CS talking about exactly?
How the end began
An Australian business journalist made the start on October 1, 2022. On Twitter he posted: “A trusted source tells me that a major international investment bank is on the brink of collapse.” Although the tweet did not contain a bank name and was later deleted, suspicion quickly fell on Credit Suisse. The info spread like wildfire.
“Credit Suisse Investment Bank could collapse this weekend” was written shortly afterwards in the Reddit forum “Wallstreetbets” with 12.7 million followers, as the NZZ writes. The post has been liked thousands of times. The discussion could no longer be stopped after someone on Twitter pointed out that the surname of the CS president, Axel Lehmann, was the same as the name of the US bank that triggered the financial crisis in 2008: Lehman Brothers. A bad omen.
As a result, the media and financial sites also spread the rumors about “CS standing on the precipice”. After that, the big bank could only do damage limitation, because some customers panicked. In addition to a temporary slump in the share price of more than 10 percent, the bank staggered more and more due to the massive outflow of liquidity.
Not rumours, but managerial failure
Many on social media do not want to accept that Finma and CS blame the rumors on social media for the misery.
The supervisory authority is only protecting the big bank, someone writes. Others believe that the reason is not rumours, but managerial failure.
And the former President of the Green Party, Regula Rytz, summarizes: “If ‘social media rumours’ can wreak such havoc and take states hostage, as the Federal Council claims, wouldn’t it be wise to finally increase safety margins tenfold?” .
