And Now on to Credit Suisse

Matthew G. Saroff
3 min readMar 24, 2023

In response to years of mismanagement, with a side order of money laundering, Credit Suisse was subject to a forced sale to UBS with a backstop from the Swiss government to the tune of ₣12,500 ($13,00.00) for every man, woman, and child in Switzerland, a total of ₣109,000,000,000.00.

But it’s not a bailout, because ……… The Aristocrats!

There is not a whole bunch that I can add to the immediate cause of all of this, that Credit Suisse was a corrupt and poorly run bank was a not particularly well kept secret for years. (The same goes for Deutsche Bank, but it’s not in crisis ……… so far ……… today)

It’s been experiencing a slow-walked bank run for the past 2–3 years, and SVB’s collapse turned that into a rout.

Adam Tooze has an interesting take on all this, which is that Switzerland, specifically Zurich, and he calls out the, Zurich based liberal elites, (Liberal in the 19th century hyper-capitalist sense) specifically, their efforts, “To build corporate champions of global scale on the basis of the incestuous networked politics of Switzerland.”

It is a rather interesting take on all of this, but I am more inclined to believe that this, much like Silicon Valley Bank’s failure, is more an artifact of our corrupt and risky international financial amusing.

There is a bit of Shadenfreude in all of this though,

The Swiss Bank’s failure looks to be turning one of the constants in bankruptcy on its head.

Typically, the shareholders are at the very end of the line as debtors, but in the case of Credit Suisse, Contingent Convertibles (CoCo) bond holders are behind the shareholders, which is creating outrage from people who neglected to read the specific terms of those bonds, which means that as opposed to getting a major haircut, they are getting nothing:

One of the elements in the takeunder by UBS of Credit Suisse was that CHF 16 billion (about $17.3 billion) in CoCo bonds got wiped out totally, while shareholders got wiped out only almost totally. Swiss regulator FINMA, when announcing the deal on Sunday, said that CoCo bonds would be written down to zero, in a sense subordinating bondholders to shareholders, which is like a total no-no very-bad-boy thing to do, because normally, shareholders would get totally wiped out first, and then bond holders would start taking their turn.

Turns out, there were some clauses in the documents of the CoCo bonds, issued in Switzerland, that allowed this under certain conditions and triggers. But no one ever reads any clauses, and so it came as a surprise, shaking up the $275 billion market for these creatures that came out of the swamp of the Financial Crisis.

What are Additional Tier 1 CoCo bonds?

CoCos — short for “contingent convertible capital instruments,” also known as Additional Tier 1 (AT1) bonds — were created in Europe in response to the financial crisis as a way to boost bank capital without diluting existing shareholders. Before, a bank would have to sell shares to raise capital, thereby diluting existing shareholders. With this instrument, they could weasel their way around selling shares and still raise capital for regulatory purposes.


Credit Swiss has been teetering on the brink for years. It has been hobbling from scandal to scandal, each time losing billions of francs along the way, and each time, its shares got beaten to a new record low. And all along the way, new investors were bamboozled into investing billions of dollars in this thing to boost its capital and keep it alive. And the money just vanished. The culture of risk-taking and doing shady deals was something that could apparently not be changed by the CEOs that came and went. Or they didn’t want to change it — despite rhetoric to the contrary — because they were focused on boosting the share price or whatever. The SNB wouldn’t let it collapse, and regulators didn’t force it to straighten out. But a lot of losses to the Swiss public and investors could have been avoided if this creature had been taken out the back and shot years ago.

Please, won’t someone think of the investment bankers?

They have a mistress, a rent boy, and cocaine habit to support.

The idea that they should have to find honest work shocks the conscience.

Oh the hu……… Well, you know.