Credit Suisse lost 4.4 billion francs unsuccessfully disentangling itself from Archegos’ collapse and likely several more with Greensill. More importantly, it took a lit match to its reputation, values, and ability to survive without help. Credit Suisse itself seems to view the dual crises as a sort of natural disaster which it simply couldn’t have seen coming. perception of Credit Suisse after the events of March alone is that the front of the house is doing sensible, safe business while the back of the house is operating a casino which imperils everything else. This is the standard flaw of Credit Suisse’s (and UBS’) strategy that the three main businesses – a domestic retail and corporate division, an international private bank, and a global investment bank – carry an inherent conflict of interest. With the sustainability strategy, in particular, Credit Suisse’s investment bank with trading activities wildly out of proportion to the rest of the bank’s size is a huge contradiction.
Powered by a financial market awash in liquidity, the unit delivers hugely volatile results which – it is now apparent – are based on taking immense risks. Besides the $4.7 billion Archegos hit, Credit Suisse is in the midst of the boom in SPACs, or special-purpose acquisition companies being used for stock-listings. This and other capital markets business boosted its results to a record. ESG ratings are an increasingly important factor in research and analysis: corporate sustainability strategies can have a material financial impact on companies, in view of ecological or reputational risks. Credit Suisse’s efforts in this area are also rooted in client demand, especially by the clientele of the future. The bank describes the values of millennials – a potentially $40 billion market – with a far stronger focus on social and environmental considerations than their parents. Credit Suisse, lacking credibility and strategic foresight, risks alienating these clients.