How Credit Suisse nearly failed: A timeline
Yahoo Finance Live’s Seana Smith breaks down the timeline of events leading up to Credit Suisse’s buyout by UBS.
RACHELLE AKUFFO: Well, Swiss Bank UBS agrees to buy rival Credit Suisse in an attempt to ease banking panic, but how did Credit Suisse get into such a bind? Here to break down the latest is Yahoo Finance's Seana Smith. Hey, Seana.
SEANA SMITH: Hey there, Rachelle. All right, so let's go through it here because UBS is buying archrival Credit Suisse. It's an emergency rescue deal aimed at stemming some of that panic that we certainly have been seeing from that ongoing banking crisis. Now the collapse of Silicon Valley Bank, that may have been the immediate catalyst, but the turmoil for Credit Suisse, well, that actually goes back much, much further. So let's get into all this.
Now, it suffered years and years of reputational damage due to a series of controversies, now the most prominent being the so-called spying scandal. That was when a former wealth star-- a manager-- a star in their wealth manager there had really directed some of the attention to the group of instigating a surveillance operation after he defected for UBS. Now, it led to the resignation of CEO Tidjane Thiam.
Things got even worse when you fast forward to March 2020, '21, with the investment bank losing $5 and 1/2 billion from the collapse of hedge fund Archegos. Credit Suisse also had to freeze $10 billion in supply chain finance funds linked to Greensill Capital, an investment that was sold to clients as low risk. All of this happening amid a longstanding push to restructure the bank. Several executive changes later gets us to July 2022. Credit Suisse names Ulrich Korner as the CEO.
Three months later, it ramps up some of these changes, including massive job cuts, spinning off its investment bank division, and that is also when Saudi National Bank took a 9.9% stake. Fast forward now to this year and even more red flags. This month, shares were hit again after it delayed its annual report due to what it called, quote, "material weakness" in its financial reporting.
The big hammer blow, though, that was when top shareholder Saudi National Bank said that it will not increase its stake because of regulatory constraints, right around 9.9%. Well, that was enough to send shares plunging by as much as 30%. Now, on Thursday, Credit Suisse did secure a $54 billion lifeline from the Swiss National Bank. And this is significant because it was the first major global bank to get emergency funding since the financial crisis.
But that, though, was not enough for the embattled lender after days of talks here with management assessing some of the strategic scenarios. UBS did agree to buy Credit Suisse for $3.2 billion in stock and assume up to 5 billion francs in losses. That was a deal orchestrated by Swiss regulators to try and help calm some of that turmoil that we have certainly been seeing in the banking sector, Rachelle.
RACHELLE AKUFFO: Certainly, that last push as the Saudi money came out was certainly that last push, but obviously, a series of incidents leading up to this collapse of Credit Suisse. Thank you. Seana Smith there for us.