The bankruptcy of the Swiss banking sector is essentially a microcosm of the bankruptcy of Western credit.
When people think of Swiss banking, two words first come to mind: credibility.
But recently, in the case of the merger of Credit Suisse, the Swiss government's operation was jaw-dropping, not only bypassing shareholders all the way, but also directly playing with debt, and losing $17 billion in debt.
How did the Swiss banking industry go bankrupt step by step?
On March 14, 2023, Credit Suisse (Credit Suisse) publicly admitted that its financial reports for the past two years had "major flaws" and that it had serious losses, and publicly appealed to the Swiss government for help.
With assets under management of about $1.4 trillion, Credit Suisse is Switzerland's second-largest bank, compared to more than $600 billion when Lehman Brothers fell.
Credit Suisse is much larger than Lehman, and if it falls, a financial crisis will be a certainty.
Source: CaiLian News Agency Credit Suisse revealed major flaws in its financial report
The Swiss government could not help but save, so it first provided 50 billion euros of liquidity, not to mention the lack of money, which has exceeded 20% of Switzerland's annual fiscal revenue.
Under normal circumstances, after receiving the bailout of the Swiss government, the confidence of the market should be stabilized, and this matter is over.
However, we are currently in a special period, especially the market panic caused by the bankruptcies of Silicon Valley Bank and New York Signature Bank.
Even with the Swiss government bailout, depositors are not afraid of 10,000, but also afraid of what if, they have withdrawn money from Credit Suisse, resulting in the loss of tens of billions of euros in deposits every day, and the rescue of 50 billion euros cannot even last a week.
By March 19, Credit Suisse had no choice but to ask the government for help again, and the Swiss government had no choice but to try to persuade the Swiss bank (UBS) to acquire Credit Suisse.
But UBS didn't want this hot potato, so it quoted $1 billion, knowing that Credit Suisse still has a market value of $7 billion, which is extremely insulting.
But the Swiss government doesn't care if you agree or not, just this way, you can't help it.
The Swiss government directly approves the $3 billion acquisition, and in compensation, the Swiss government will provide UBS with an additional 14 billion francs of liquidity.
However, buying a company is not so easy, at least the shareholders have to agree, right?
The majority shareholder, the National Bank of Saudi Arabia, certainly disagrees, because the price of the acquisition means that Saudi Arabia loses more than $1 billion.
Source: Daily Economic News The National Bank of Saudi Arabia suffered huge losses
But as we said earlier, market confidence is extremely fragile and there is no time for UBS to convince shareholders.
The Swiss government simply played on its laurels and urgently changed the law to allow the acquisition of a company without the consent of its shareholders, as long as the government agreed.
This practice is hooligan, but more rogue is behind.
In order to reduce the burden on UBS, the Swiss government directly announced that it had cancelled the 17 billion bonds issued by Credit Suisse, that is, it did not recognize the legitimacy of the bonds.
You know, debt is higher than equity, this is the norm of business, the Swiss government even dares to break this, then not only the financial industry, but even the business reputation of the entire country of Switzerland will collapse.
Swiss banking originated in the 16th century, after the beginning of the Age of Discovery, Europe's economy continued to develop, many people became rich, but with money, they also had trouble.
In Europe at that time, the mainstream social atmosphere was still dominated by religious concepts, opposed to commerce, businessmen made so much money, and were incompatible with mainstream social concepts.
Worried businessmen need a safe place to store their wealth, and looking around Western Europe, Switzerland is undoubtedly the best fit.
First of all, Switzerland is located in the heart of Western Europe, with Apennines to the south, France to the west, and Germany to the north, at the crossroads of traffic, with easy access and access.
Secondly, Switzerland's terrain is a plain in the north, mountainous hills in the south, and the plain area is suitable for production, so that Switzerland has a good economic strength, once it encounters war, the plain can not be held, and it can retreat into the southern mountains at any time.
Topographic map of Switzerland
Switzerland is a multi-ethnic country, and the official languages alone are German, French, Italian and Retoman, which means that Italians, French and Germans can find their homeland in Switzerland.
These three advantages gradually made Switzerland a center for European merchants to hide their wealth.
By the time of World War II, there was another advantage.
At that time, Nazi Germany had plundered a lot of wealth from Europe, and where to store it was a question.
If placed in Germany itself, considering that Germany is at war, the assets of the magnates may be expropriated at any time.
Looking around Germany, Switzerland is the most suitable, in addition to the three advantages mentioned above, Switzerland also has an advantage, its main ethnic group is Germans, 74% of the people speak German, and Germans are the same language.
After all, it was their own people who were reassuring, and the Nazi magnates deposited a lot of their wealth in Switzerland.
After Germany's defeat, Switzerland was supposed to return the wealth, but strangely, Switzerland ended up paying a $60 million fine (protection fee) to the United States.
It is not known what exactly the two countries have done privately.
In addition to the wealth of the Nazi elite, a large number of Jewish wealth has also become a pocket of Switzerland, Jews have always been good at business, and the money saved in Switzerland is indispensable.
When World War II broke out, Jews were massacred by the Nazis, and the money they deposited in Switzerland became "ownerless wealth" and was appropriated by Switzerland.
We don't know exactly how much of the money is, but it's safe to say that many of the victims' families have been suing Switzerland to return the money to them.
The Swiss solution is to drag it out, until all the families of the victims have died, and there is no proof of death.
Some of them really can't help, so they can only be compensated, but the families who can get compensation are a minority after all.
Source: China Youth Daily Swiss banks were awarded reparations for World War II
After World War II, the Swiss banking industry, which had accumulated enough funds, began to regard secrecy as its biggest propaganda highlight.
Objectively speaking, its confidentiality measures are indeed good, for example, sometimes the customer's name is not known, and it is directly replaced by a string of numbers.
A series of secrecy measures made it popular with the rich, became more and more famous, and became a worldwide financial center.
In addition to secrecy, Switzerland's neutral status is also a reason for becoming a financial center.
Switzerland is permanently neutral and can interact with all countries, regardless of ideology, which makes the plutocrats inclined to keep their money in Switzerland.
For example, Russian tycoons, because Russia and Britain have long been antagonistic, if you put money in Britain, it is easy to confiscate, if you put it in Switzerland it is different, Switzerland does not look like it will be confiscated, it is much safer.
Secrecy + neutrality is the foundation of the flourishing of the Swiss banking industry, and Switzerland has even written secrecy into law.
But all this, starting with the 2008 financial crisis, gradually changed.
After the 2008 financial crisis, the United States was in financial trouble and targeted Switzerland, accusing Switzerland of helping the rich evade taxes and asking Switzerland for a specific list.
By 2009, Switzerland was under pressure to provide the U.S. Treasury with a list of 4,450 U.S. customers who used Swiss banking to evade taxes, loosening Swiss banking secrecy.
Since then, Switzerland has repeatedly provided lists of customers to Western governments, such as in 2019, when UBS provided the French government with a list of up to 40,000 people suspected of tax evasion.
It can be said that the secrecy system has existed in name only.
Interestingly, Switzerland only provides these lists to Western countries, never to non-Western countries.
After the conflict between Russia and Ukraine, Western countries imposed extreme sanctions on Russia, freezing all Russian property, whether official or private.
Seeing that Europe and the United States had gained a lot from robbing Russia, Switzerland also tore up the neutral archway and froze a large amount of Russian property.
Source: CCTV News Client Switzerland freezes Russian assets
Switzerland froze a total of $27.1 billion in Russian assets, of which $8.1 billion was directly frozen by the Swiss government, and the remaining $19 billion was mainly frozen by Credit Suisse.
Credit Suisse's freezing of Russian assets has its own direct factors.
Back in 2021, a supply chain company called Greensill, which happened to be the main buyer of the company's securities, spent tens of billions of dollars and ended up losing more than $3 billion.
Then came the famous Archegos affair, a hedge fund owned by a Korean-American named Bill Wong who reinvested in Chinese concept stocks in 2021, but then the Chinese concept stocks plummeted, losing $15 billion in a single day, setting an unprecedented record.
Most of Bill Wong's heavy position in Chinese concept stocks was borrowed from Credit Suisse, and the Archegos thunderstorm directly caused Credit Suisse to lose a lot of money, losing CHF 1.626 billion (about US$1.8 billion) for the whole year of 2021.
In 2022, the situation has not improved, Credit Suisse's losses continue, even the revenue has fallen sharply, especially in the third quarter, the financial report shows that the revenue is only 3.804 billion Swiss francs, a sharp drop of a third year-on-year, a loss of 4 billion Swiss francs.
Source: Beijing Time Finance Credit Suisse 2022 third quarter financial report
On the one hand, its own continuous losses, on the other hand, Russia's huge property, just like a hungry wolf sees a sheep and can't help it.
Who would dare to believe a bank blatantly gobbling up customers' property?
As a result, Credit Suisse's deposits have lost a lot, reaching CHF 123 billion in 2022, and the liquidity has dried up, which directly put Credit Suisse in trouble.
In addition to freezing Russian assets, Swiss officials openly threatened China in interviews that if the two sides of the strait are reunified, they will consider complying with EU sanctions against China, with the subtext of confiscating Chinese assets.
Swiss officials threaten to freeze Chinese assets
From sanctioning a large number of Chinese companies under the pretext of "unwarranted" to embezzling a large number of Russian property, and all kinds of rampant and hegemonic, Western credit is collapsing rapidly with the naked eye, and myths such as "free market" and "private property is sacred and inviolable" that were once created are being shattered one by one.
The bankruptcy of the Swiss banking sector is essentially a microcosm of the bankruptcy of Western credit.