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ZURICH – In one of Europe’s wealthiest squares, dominated by the looming headquarters of a huge international bank that disintegrated just a few weeks ago, the impeccably dressed men and women who drift in and out of gleaming offices are in the grip of a mafia omertTO.
“You’re not going to get anything from anyone,” one of them says with a firmness that should draw a line under any conversation before it’s even begun. Dominate the informal code of silence. His friend drags him away, through the doors of a second global bank, the one that bailed out the first one for 3 billion Swiss francs.
This is the Paradeplatz in Zurich, the largest city in Switzerland. Headquarters of Credit Suisse, whose collapse in March after 167 years could have triggered an all-out global crisis if UBS hadn’t been forced to step in and take it over. The recriminations started almost immediately. Now, amidst the noisy trams and luxurious chocolate shops, this 17th-century piazza could rival the Vatican for the way the fog of secrecy has descended.
Stay there long enough and occasionally a whisper might be heard about the demise of the once great bank. Speculation, nothing more. Gossip about the political repercussions or what might happen to the bonuses, exchanged over a strong coffee and sneaky morning glances at the Financial Times or the Neue Züricher Zeitung. But obviously not with strangers, and certainly not with those who approach with the journalist’s notebook in hand.
It’s easy to spot the bankers in the Swiss financial capital: perfectly tailored blue suit, single-breasted trench coat, carry-on case (leather, preferably). And what about the demise of Credit Suisse, then? “We can’t talk about it,” says one of them over an espresso with a colleague.
Round the corner, where a younger man is smoking, behind the dead bank headquarters which still stands at the northern end of Paradeplatz. He also dismisses all questions: « For this, we have corporate communications. »
Nobody is responsible
There is a reason for all this silence. The Alpine nation, known for its utmost discretion in its role as banker to the world’s wealthy, is still trying to figure out exactly what went wrong and what to do with the people who brought Credit Suisse to the brink.
The public is « very angry, » according to Tobias Straumann, professor of modern and economic history at the University of Zurich, especially since it’s only been 15 years since UBS own public bailout.
« The taxpayer has to bail out a bank, where people made a lot of money, and nobody is accountable now, » he said. « That’s the feeling. »
With national elections coming up in October, the question shifts to who will get that sentiment. Only the bankers themselves? The regulators who saw it go up in flames? The politicians who made the rules in the first place? All of the above?
The Swiss parliament has begun to exercise its authority — refusing the government’s request to approve an emergency credit line to support the acquisition. But this was largely symbolic. He will decide in June whether to start a parliamentary commission, which will then be able to summon the people involved for questioning.
« My prediction would be that not much will happen in the short term, » Straumann said. « But probably after the election, you’ll see a bigger coalition actually doing something, »
Pig market
It won’t help the public mood that some Credit Suisse bankers floor sue for lost bonuses. A few hundred years ago Paradeplatz was known as Säumärt – pig market, and now accusations of snouts in feeders have become more and more common in public discourse.
Céline Widmer, a Swiss Social Democrat MP, has called for a ban on bank bonuses, as well as higher capital requirements for lenders to make them safer. In her view, Switzerland’s financial watchdog should also get stronger sanctioning powers.
“It was the behavior of the banks, which [demonstrated] they are not responsible,” he said of what went wrong at Credit Suisse.
The Swiss authorities are under close scrutiny. While they prevented the bank’s collapse from triggering broader financial contagion, government and regulators face questions about why they didn’t act sooner.
As it was, Credit Suisse had been in trouble for years, but within days in March it quickly lost the confidence of financial markets amid widespread panic over bank failures in the U.S.
According to Finance Minister Karin Keller-Sutter, the bank would have run out of money without the hasty takeover by UBS, as customers withdrew their deposits and its shares and bond prices plummeted.
The government has promised to absorb up to 9 billion francs in losses if needed and the Swiss central bank has offered 100 billion francs in liquidity.
Legal proceedings are underway to challenge decisions made on that pivotal merger weekend, including the Swiss financial watchdog canceling CHF16 billion of Credit Suisse bonds, reversing the usual hierarchy of losses in the event of a crash .
Those investors, whose bonds are now worthless, won an early victory by forcing the issuance of a disputed emergency decree.
A banking monster
And life could get harder for the other bank based on Paradeplatz now that it has gobbled up its rival.
« We’ve created a monster with UBS, » said Thomas Borer, a former Swiss ambassador to Germany who is involved in representing the interests of Credit Suisse bondholders wiped out by the takeover.
“[It’s now] one of the largest banks in the world when it comes to wealth management. We are not one of the largest countries in the world. How should we regulate it? That’s what the debate is focusing on. »
The parliamentary inquiry could drive that debate, and even tight-lipped Swiss bankers are excited about it.
« We are advocating for an independent, comprehensive and open-minded review of these events, » said August Benz, deputy managing director of the Swiss Bankers Association.
The Credit Suisse bankruptcy had aroused « certain emotions, » Benz said, but he hoped an investigation would help Switzerland choose « the right measures » in response to the bank’s failure. He rejected the notion that a global bank like UBS could be too big for the country.
“Germany has one [globally systemic bank]Italy has one, Spain has one, [the Netherlands has one] and Switzerland looks like it will have one,” he said.
No longer stable
Back on the streets of Zurich, Credit Suisse headquarters is a visible reminder of the uncertainty caused by its bankruptcy, peering across Paradeplatz at UBS.
« It’s a huge institution that suddenly disappears, » says Reinhard Berger, a 36-year-old chemist, as he waits for the tram.
A few blocks away, Eliane Christen, a 35-year-old patent engineer, is melancholy. Her bankruptcy makes her « uncertain about the stability we always say Switzerland has, » she says. Stability seemed to vanish within a weekend.
