Railway Financing
After the founding of the federal state in 1848, Switzerland was a few years behind, especially in railway construction. By comparison, around that time the Liverpool and Manchester Railways were already carrying more than five million passengers. But the Swiss banks did not want to finance such large-scale projects and negotiations with foreign banks failed.
So in 1856 the group around Alfred Escher, a railway baron and the most powerful Zurich politician of his time, founded the Schweizerische Kreditanstalt (SKA). Half of the initial capital was raised by the liberal Zurich bourgeoisie around Escher, and the other half came from Germany. The euphoria was great.
At first, the bank invested heavily in a single railway company, Alfred Escher’s Nordostbahn. Later, it orchestrated the financing of Escher’s Gotthard Railway. There was no financial market supervisory authority that could have criticized excessive risk concentration or even political influence.
Most of the time this turned out well, but the numerous crises of the railway companies in the 19th century were also felt by the SKA. The railway lines financed at that time had to be saved and nationalized. However, they still exist today.
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Investments in Germany
Later, in November 1857, the bank was involved in the founding of the insurers Rentenanstalt, the first life insurance company in Switzerland (today Swiss Life), as well as Helvetia and Schweizer Rück (Swiss Re). It financed the engineering industry and launched an important predecessor of ABB and OC Oerlikon. Towards the end of the 19th century, SKA played a decisive role in gathering investment for the electrification of the country.
From 1924 onwards, the major Swiss banks invested in Germany on a large scale. These were not always happy moves, as Germany blocked foreign currency exports during the Great Depression. The important Banque d’Escompte Suisse collapsed in 1934 and the Schweizerische Volksbank needed state aid. The SKA showed itself to be a survivor at the time and got off comparatively lightly.
The looted assets and compensation
During the Second World War, SKA was not the only Swiss bank to play an inglorious role. It accepted looted property from Nazi Germany, to a certain extent also looted gold, and sometimes offered a hand in the forced expropriation of its clients by the Nazis. It was only in the 1990s, under pressure from US lawyers, that Credit Suisse came to terms with this dark history. It and UBS compensated Jewish victims with USD 1.25 billion.
During the economic miracle years, Swiss banks developed into the largest offshore financial center in the world. Because of political neutrality, assets from the Middle East ended up in Switzerland after the Suez Crisis in 1956. Europeans brought their money to Zurich because of the country’s stability and since the collapse of the global fixed exchange rate system. For many, banking secrecy also played a role.
Buying in the competitors
In April 1977, it was discovered that those responsible for the SKA branch in the southernmost tip of the country had been illegally moving black money from Italy to Liechtenstein for years, where they speculated it away. SKA suffered a loss of CHF 1.4 billion, an enormous sum from the point of view of the time. The bank’s share price plummeted by 20%. The scandal swept away much of the old SKA management and brought Rainer E. Gut to the top of the bank.
Rainer E. Gut had himself become acquainted with the American banking business in New York as a young man. He was a gifted deal-maker and shaped his bank through acquisitions. CS Holding, which was formed in 1982 and to which SKA was subordinated a few years later, snatched up Neue Aargauer Bank, the largest regional bank in the country, but above all Clariden Leu and Schweizerische Volksbank, two of the five remaining large banks in the country.
Rainer E. Gut, however, wanted to build up a leading international bank. The flourishing asset management business provided him with the necessary funds. In the USA, CS had gradually taken over First Boston, one of the best-known investment banks.
Conservative house bank of the Zurich elite
In Switzerland, Credit Suisse (CS) remained known as an entrepreneurial bank and continued to help Swiss companies conquer world markets. In a certain sense, it also remained a quintessentially Zurich institution despite its internationalization.
Since 1876, it has had its headquarters in the iconic building on Paradeplatz. A large part of the last 16,000-plus Swiss CS employees worked in Zurich. Most Zurichers have neighbors or friends who work at the bank. It supported Zurich’s Tonhalle and helped finance the Kunsthaus extension.
CS shares peaked in 2007, and the bank was worth around CHF 100 billion. The experience of its crisis at the turn of the millennium, a little caution and luck helped CS to survive the financial crisis of 2008 as well. With a lot of money from Qatar, it managed to survive on its own, while the others collapsed in rows and had to be rescued by the state: UBS, Fortis, Royal Bank of Scotland.
Credit Suisse has always relied on investment banking. The returns were high at times, but hardly ever covered the risk taken. The bank always wanted to win over the world’s rich entrepreneurs, their private assets, and their companies. Under CEO Tidjane Thiam, who was appointed in 2015, the bank increasingly focused on expansion in Asia. And it made considerable savings.
The last rescue failed
A final change of boss in the summer and a new strategy did not lead to the hoped-for liberation. Rumors that Credit Suisse was on the brink of collapse actually got the bank into trouble in October 2022. Especially in Asia, rich clients withdrew enormous amounts of money. People hardly talked about the bank’s potential anymore but about its liquidity ratio and equity.
The survival artist pulled through once more: In December, it raised CHF 4 billion in fresh share capital, and the bosses spoke of stabilization. When the first US regional banks collapsed in March 2023, everyone wondered who would be next. The prices for credit default swaps spoke a clear language: Credit Suisse. Liquidity assistance from the SNB did not help.
On 19 March, the end of the bank was sealed: UBS would buy CS, and the Confederation, and the National Bank acted as best man with hundreds of billions in emergency loans. The story of the unforgettable old lady was over.
