The phones are smoking. Several memes have been running among Genevan bankers in recent days as a result of the collapse of the Swiss financial system. In one of them, a line of clowns with their colored wigs walking is seen in a photo, with the following caption: “Credit Suisse managers and heads of the control department going to work”.
Some take it with humor. But others not so much. Words such as “shame”, “historical scandal” or “national wound” are found in the headlines of the Swiss press. The hasty purchase of Credit Suisse by UBS has hit what until now was one of the biggest economic assets in his country. Even one of its hallmarks: the financial system.
In the film The Third Man (1949), in a famous monologue, Orson Welles exclaimed that “in Switzerland they had 500 years of love, democracy and peace. And what was the result? The cuckoo clock”. Well, the watches remained, but it has been the banks that in recent decades have helped catapult Switzerland onto the international scene. Now doubts arise. And Swiss pride is wounded, with more holes than an Emmental cheese.
The Tribune de Genève recognizes that the fall of Credit Suisse is synonymous with the “disappearance of a myth of the Swiss landscape”. For example, the entity sponsored the soccer team or a legend like tennis player Roger Federer. The psychological impact is remarkable.
From the SVP party they describe what happened as “a catastrophe. It is an entity as old as our own history. It is the epitome of Swiss banking.” Thomas Borer, a former diplomat and bank employee, told the Financial Times that “decades of mismanagement at many banks have not only ruined the industry, but have tarnished the brand of Switzerland.”
In order to understand the magnitude of what happened, the economic historian from the University of Zurich Tobias Straumann, in statements to various media outlets, underlined how, first of all, the financial debacle is a “crisis of the Zurich elites.” You have to think that Credit Suisse was founded by the Swiss businessman Alfred Escher, who, in short, had the great idea of ??drilling into the mountains of Switzerland in the middle of the 19th century to open the train tracks.
This is how banks, by financing the industrial fabric and innovation, built modern Switzerland, which went from a mountain community to an industrial nation and in a short time to an economic powerhouse, without being able to count on a drop of oil or raw materials. premiums, by becoming a banking haven.
After the bankruptcy of Swissair at the beginning of this century, or the more recent humiliation of Toblerone, which has moved part of its chocolate production out of Switzerland and has been forced to remove the iconic image of the Matterhorn that appeared on its confection , the Swiss now have to assume that their financial system is no longer as solid or immune to turmoil as before. Even though Credit Suisse was solvent and compliant, it couldn’t help but fall. Is Switzerland no longer what it used to be?
Straumann associates it with the end of bank secrecy, which de facto after the financial crisis of 2008 has shaken –formally– old opaque habits typical of Swiss bankers. According to this thesis, without the advantages of its secrecy, Switzerland would have ceased to be competitive in the global village. “The internationalization strategy of Swiss banks, which was thought to be good, has actually turned out to be a disaster. The ability of the Swiss elite to engender global economic players has been overestimated. Switzerland cannot be in the first league of world finance”, indicated Straumann.
Hans Gerbasch, professor at ETH Zurich and co-director of the Swiss Economic Institute, acknowledges to this newspaper that “Switzerland’s reputation has been shaken by this crisis. It is surprising, in particular, that other rescue measures provided for in the system have not been resorted to and a purchase by a larger bank has been opted for ”, he highlights.
“But the problem is not so much for clients who want to entrust the management of their wealth to a Swiss entity: they are likely to continue to do so. The reputational damage affects foreign investors rather, because after the cancellation of the value of the Credit Suisse convertible bonds, someone may now think twice before embarking on a financial operation in Switzerland ”, he warns.
They say in the Genevan financial circles that when the possibility of the BlackRock fund entering the game to save the entity was glimpsed, the authorities were activated to preserve the Swiss essence of the banking sector and forced the purchase by UBS. More than competition, the reason of State mattered, because, as the Swiss Bankers Association (SBA) said, “the stability of the financial center is vital for the Swiss economy as a whole.”
This decision, which may sound protectionist, has created a banking giant with assets twice the GDP of the same country: many eggs in a single basket. The Ethos Foundation, which protects the interests of minority shareholders, speaks openly that we are facing “an unprecedented failure in the history of the financial center of Switzerland.” This body is studying legal actions because “there are risks of having created a dominant position in the Swiss banking market.”
“Foreign investors may wonder if Switzerland is not a banana republic where the rule of law does not apply,” University of Bern academic Peter V. Kunz exclaimed to Bloomberg. “It is true that a dominant bank has been created and this does not benefit the client. Now, now I feel more secure, but looking to the future it must be clear that this cannot happen again”, emphasizes the academic Hans Gerbasch.
However, there are those who prefer to flee from gloomy tones. Because Switzerland maintains an indisputable attraction. According to the Boston Consulting Group, the country continues to be a magnet when it comes to attracting money: in 2021 alone it gave shelter to some 2.5 trillion dollars, ahead of Hong Kong or Singapore. The country recovered its pre-pandemic GDP well before the other European economies. It also has full employment, thanks “to a combination of a high level of education, an entrepreneurial spirit, some flexibility in the labor market, a business network of adequate size and a high export capacity,” recalls Hans Gerbasch.
Another aspect to highlight is that Switzerland is much more than banks. Official data, for example, show that the balance of Swiss exports is very positive in those non-financial sectors where it enjoys excellence and where its leadership seems unassailable. We are talking, for example, about the sector of watches, precision instruments or chemical and pharmaceutical products. Companies like Roche, Novartis (and Nestlé), brands that can take over as business symbols of the country.
In fact, a senior UBS official in Zurich, who prefers not to be quoted, defends this newspaper that the country not only did the right thing with Credit Suisse, but that the Swiss model is still valid. “I partly understand the skepticism, but Switzerland is also a country that managed to solve an existential problem, because the failure and abandonment of Credit Suisse would have been disturbing for the world but tragic for the country. I don’t know how many others would have had the same decision-making capacity”, reasons this senior executive.
“Switzerland is a wonderfully pragmatic country and one of the few that, while it may sound selfish, also manages not to be as self-destructive as others,” he says. “Two examples: referendum to increase vacations: rejected. Referendum to raise VAT and the retirement age to reduce the social deficit by one third: approved. And referendums in Switzerland require a broad consensus. What other population would vote like this? I can’t think of any.”
