Scandal, Sleaze and the Collapse of Credit Suisse, with Duncan Mavin
48:19 Share

This episode is sponsored by Indeed. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy, just use Indeed. When it comes to hiring, Indeed is all you need. Stop struggling to get your job posts seen on other job sites. Indeed's sponsored jobs helps you stand out and hire fast.

With sponsored jobs, your post jumps to the top of the page for your relevant candidates so you can reach the people you want faster. And it makes a huge difference. According to Indeed data, sponsored jobs posted directly on Indeed have 45% more applications than non-sponsored jobs.

When we recently used Indeed for a job vacancy, the response was incredible. With such a high level of potential candidates, it was so much easier to hire fast and hire well. Plus, with Indeed's sponsored jobs, there are no monthly subscriptions, no long-term contracts, and you only pay for results. How fast is Indeed? In the minute I've been talking to you, 23 hires were made on Indeed, according to Indeed data worldwide.

There's no need to wait any longer. Speed up your hiring right now with Indeed. And listeners of this show will get a $75 sponsored job credit to get your jobs more visibility at indeed.com slash intelligence squared.

Just go to indeed.com slash intelligence squared and support our show by saying you heard about Indeed on this podcast. That's indeed.com slash intelligence squared. Terms and conditions apply. Hiring.

Indeed, it's all you need.

Welcome to Intelligence Squared, where great minds meet.

I'm producer Mia Cirenti. Our guest today is financial journalist Duncan Mavin, currently an editor at Bloomberg. Mavin was previously a reporter and editor for The Washington Post and was The Wall Street Journal's financial editor for Europe, the Middle East and Africa.

In his new book, Meltdown, Scandal, Sleaze and the Collapse of Credit Suisse, Maven examines Credit Suisse's scandal-ridden demise and unpicks the web of corruption that permeates international finance. Carl Miller, the journalist and fellow at Demos, spoke to Duncan to find out more. Duncan, very warm welcome to you to Intelligence Squared. Thanks. Thanks for having me.

So the collapse of Credit Suisse, I mean, that's a big story to take on, isn't it? What drew you to it? Yeah, no, I think you're right. It's a huge story, one of the biggest banks in the world, one of only a handful of banks that were kind of designated as systemically important on a global basis. So what drew me to that is, yeah, I think, you know, I'm a financial journalist, and so it's appealing to try and explain what on earth happened there, how does something like that happen,

how does a bank that big collapse? Well, something's clearly gone wrong. And I think that's kind of the job of journalists to try and figure out why things go wrong. I mean, I had a personal interest as well. My previous book about a company called Green Cell, which had collapsed a few years earlier, was deeply connected to Credit Suisse and really a part of the reason for Credit Suisse's collapse. So I sort of was drawn to it from the first book.

And as I say, I think, you know, something big like that on your beat as a journalist, it's almost, you know, imperative that you sort of, if you can write about it, you try to write about it. Was there a particular moment which marked, right, I am now going to really determine what happened in Credit Suisse? I mean, was it like a particular access that you got? Was it the moment you actually read that it had collapsed?

Right after, what happens when you write a book is, you know, straight away the agent, the publisher are on your back. What are you going to do next? And that's sort of what happened to me with my first book. What are you going to do next? And at the time I sort of said, I think Credit Suisse is a really interesting story. You know, my insights into it from this previous book, you know, they've kind of given me some, you know, I think there's something there that needs to be explained.

And, you know, to be quite honest, my agent and publisher were like, yeah, well, let's keep an eye on it. And then, you know, within a short period of time, Credit Suisse actually collapsed. They came back to me and said, remember when you said you would do something on Credit Suisse? So suddenly I was sort of, oh, yeah, I did say that, didn't I? But

But there was a moment, I was kind of thinking, did I have enough? Was I the person to write it? Or were there other journalists who would do a better job? Were there people who were closer, had better sources? So I think that's kind of an important thing to ask yourself as a journalist.

And as I was asking myself this question, one or two critical sources who had known for a while got in touch and said, "If you're doing a book on Credit Suisse, I'd be willing to talk to you and get everyone else to talk to you too." And I thought, "Okay, well, now I have critical mass. Now I can try and get others." And so that was a bit of a moment where, yeah, suddenly I had just sort of gone over the edge and now there was enough to do it.

Honestly, those couple of sources were helpful, but in the end, it was just a lot more work than that. Once you start to take it on, you realise, as always, there's so much more to be said, so many more people to talk to. Well, let's actually talk about sources briefly, Duncan, before we jump into the story proper, because some of the access that you seem to have had for the book looks extraordinary. I mean, you're laying out arguments, rippling across boardrooms and

political intrigues within the high finance and I mean is it a moment after a collapse like this is that a particularly kind of opportune moment to try and build those kind of links presumably people have a bit less to lose then and well apart from their reputations and are trying to kind of try and shape the narrative in one way or another

Yeah, I think you're onto something. I think it's almost like they've got a lot to lose. They all want to make sure it's not them to blame. So what happens actually at an organization like Credit Suisse, first of all, thousands and thousands of employees, not all of them have got really insightful things to say. Maybe they don't actually know what really happened to a lot of them, but they might have little bits and pieces. So they all suddenly become available as sources because they're no longer kind of bound by having to stick to what the

their careers are kind of over to some degree already at the bank, so they were willing to talk. But I think also at the very top levels,

wants to give their version of the story. Everybody wants to say, you know, well, okay, some people want to say, I had a little bit to play in it. It's partly my fault. But I also think there's this other stuff. Some people want to say, it's got nothing to do with me. And this is the person you should speak to. And this is the thing you should look into. But all of those people become really valuable sources in a way that they're not before the bank has collapsed. So yeah, I think in moments of crisis,

as a journalist that is a really rich time to kind of talk to people as always you've got to kind of balance off all the different views all the different things you get told and figure out like what what is the what is the most truthful version of events what what is the the right thing to say here because you know that everybody comes to the table with their own biases and and they only always have part of the story well to the story then and um so the early parts of the book like

at the emergence, didn't they, Duncan, of the kind of the modern shape of Credit Suisse? And one thing that you put lots of emphasis on is this kind of amalgam of Swiss slash European banking culture with American, especially investment banking. Tell us a bit about that and why that was an important thing for you to kind of...

really kind of spotlight early on? Part of it was trying to find, you know, what is it about Credit Suisse that makes Credit Suisse collapse rather than some other bank? You know, they're essentially all doing similar kind of things. So why is it that this one collapses? And one of the things that I thought was really important was that there was a unique element about the way the bank was set up in that it was

essentially half Swiss and half an American Wall Street investment bank. And in both cases, it kind of wasn't the top level. It was close to the top level, but it wasn't the best Swiss private bank. It wasn't the best Wall Street investment bank. It was kind of the second best in both worlds. And so there was this constant effort to be the best, which meant that there's constantly trying to sort of push the envelope, push the boundaries on risks. You

in both parts of the organization. I think there's also some unique tensions that pop up there because the Swiss culture and the Wall Street culture, Wall Street slash City of London culture, very different. Both really like money, but the Swiss culture is generally to kind of be

be a bit more modest about that and hide it a little bit. And the Wall Street City of London culture is much more flash and we want to show everything we've got. So they both love the money, but they have very different attitudes to how you present yourself around that money. So that leads to a sort of constant tension, which sort of upsets executives often. And then I think there's a sort of, excuse me, I think there's sort of third element to it, which is that...

They both have problems. The Swiss private bank has this kind of, it relies on this sort of bank secrecy act that the Swiss have had for almost 100 years now, which the benefit of which is, you know, you can be, you can help your clients and not tell the world everything about them. The negative side of which is you probably attract clients who don't want to tell the world anything about them. That's, you know, oligarchs, best spots, whatever.

organized crime, you know, lots of people who got something to hide. And then the investment bank, you know, it has blown up many times. And investment banking has a tendency to go through these waves of kind of making lots of money and then blowing up. And so you kind of put these two things together and it's sort of

almost inevitable that things will go wrong. And one of the threads then seems to be the constant restructurings and strategic visions that the kind of chairman and CEOs try and create to deal with this problem of culture and international inspecificity. You know, one bank, regional centres, thematic centres,

Tell us a bit about that, Duncan, because that looks like anyway, it's this kind of bedrock source of continuous instability. So it is. I think there's this, as I say, there's this sort of constant tension. And it means that they're constantly pulling in one direction and then in the opposite direction. And that means they're laying people off and then hiring big names. And there's not much stability there. You know, I should say there are a lot of people who worked at Credit Suisse who loved it over the years because, partly because of this kind of culture that was sort of

gung-ho and we're going to do things differently. But this push and pull between the different strategies constantly, especially the last 25, 30 years or so, was really challenging, I think. And so they, unlike some other banks who said, this is what we're going to focus on, we're going to do this one thing really well, Credit Suisse never quite got there. Or when it did, it kind of would suddenly rip that up and start again. So yeah, I think that is sort of throughout the story of Credit Suisse, there's this kind of, what is it we really want to be known for?

And as a result, it's sort of constantly changing and it's whiplash for people who work there. Well, one thing that doesn't change is the scandals.

Because it sounds like there's this constant drumbeat of scandal throughout your entire story, throughout the entire story of Credit Suisse, from the left, from the right, all over the place. I mean, CEOs clearing up legacy scandals whilst there's new scandals brewing under their watch, which will be the job of the next CEO to deal with. Let's look firstly at the scandals with the longest historical roots. So, Nazi golds.

And they just would not come clean about that, would they? So you're right to point to the scandals. And the whole, you know, I could have written a book in many different ways. When you have a book like this, you could write in many different ways. I chose to write about the scandals because I think they're really important to what happens at Credit Suisse because they sort of destroy the trust that underpins banking. But yeah, let's start with Nazi gold, which, you know, is brilliant.

Probably, it's not the first scandal, but it's certainly a really big one and a really important one, I think.

It's a bit of a cliche, right, to talk about Swiss banks and Nazi gold. I think it's sort of, you know, people talk about it and they don't actually think too much about it. I found it shocking, frankly, once I started to dig into it, how recent this was. This was not a historic thing. I mean, obviously, they took the money 100 years ago or so, but actually, they were still dealing with the legacy of that problem, at least as recently as the 1990s and beyond.

So, you know, what happens essentially in the 1990s is a bunch of senators in the U.S. decide that they need to look into this and they start to dig into Credit Suisse, but also the rest of Swiss banking. And what they find is that actually there's still a lot of money there that is tied to either victims of the Holocaust or to the Nazis. And when they push the Swiss banks and Credit Suisse in particular to complain on this,

The instinct of the Swiss banks and in particular of Credit Suisse is to say, you know, to try and cover it up. So, you know, it's interesting as well, I think, to look at exactly what they did. So we sort of I think, as I say, it's a bit of a cliche to think they took money from the Nazis. They took gold from the Nazis and laundered it when other banks around Europe wouldn't sort of under the guise of neutrality. Right. So Switzerland's neutral. And I think we tend to think that's really true.

A positive sometimes, but actually it sort of means they're in some ways they're kind of amoral. So, yes, they took money from the Nazis and they laundered that money. But what they also did was in the run up to the war, a lot of Jewish people around Europe would say, well, I'm worried about the Nazis. I'm worried they're going to come for me. So I'm going to put my money elsewhere. And there's an example I run through in the book has been reported elsewhere, but it's

Fantastic example, a woman whose father had had a factory in Eastern Europe and he saw the Nazis coming and said, well, I'm going to get some of this money out. And he put some money in a bank in the UK. He put some money in a bank in Paris and he put some money in Crote Suisse.

And after the war, she came to get the money out. She had his account details and she had her name and she knew everything about the accounts. And she went to London and gets the money. She goes to Paris. She gets the money. She goes to Credit Suisse and they say, I'm really sorry. Have you got a death certificate? And her father had died in Auschwitz. So of course she doesn't have a death certificate. And so they refused to give her the money for years and years and years. And while she's sort of trying to get this money back, they're just taking fees out of the account.

Eventually, she gets it in the 1990s. I mean, this is sort of staggering that this is going on as recently as then, but it continues to go on even after that. So in the '90s, they pay a big-- the Swiss banks collectively pay a big settlement.

say big but a lot of people think it should have been much larger and In fact, they kind of agree at credit suites to have a monitor placed in the bank by the Americans who spends decades trying to find more evidence of money they buy the taken on behalf of the Nazis or from victims of the Holocaust who haven't been given their money back and in fact as recently as kind of as Credit Suisse is collapsing this guy is still there still allegedly finding more information that ties

the bank back to its Nazi past. Gosh. And unless I'm mistaken, when you were reflecting on that particular story, you know, and in the face of, as it seems Crepe Swiss always tried to do, was to just, you know, blame a kind of rogue official or overzealous kind of teller. There you said this really looks like it's a matter of policy. This was deliberate policy by the bank.

Yeah, I think that's that comes out time and time again. And you're right. Through many of these scandals, the response of the bank is to either blame an individual or kick it down the line, right, to sort of not settle, not deal with the legal stuff, but just to push the legal issues further down the line. And the effect of which is to essentially say, you know, to not take responsibility for any of it.

And I think that's really problematic because I think it sends a message that, you know, this is part of our business. This is what we do, you know, whether that's netting gold or whether that's breaching sanctions or some of the other scams that come later. It's kind of, you know, it's a risk of our business. And so culturally, I think if you send that signal to everyone and it works in the bank,

then you kind of have to expect that they will misbehave from time to time, right? I think it's sort of inevitable. If you instead settle and say, hold your hands up and say, you know, we did something really wrong and we're going to pay out what we ought to pay out, then that sends a signal to everybody in the bank, we don't think this is the right way to behave and we'd like to stop it. But if you keep pushing it down the line,

kind of says to everyone the opposite is true. And is it also Swiss neutrality that's the main explanation for the sanctions busting? Because that seems to be another like just very enduring practice that gets uncovered again and again, you know, Iran, Libya, Russia, basically the banking, deliberate kind of cooperation with oligarchs and other sanctioned individuals to evade various kinds of economic sanctions. Yeah, I mean, I think you can tie that all into kind of

Swiss banking privacy. So this law they introduced 100 years ago, which was to, in theory, protect

clients of the bank from intrusion by governments who might want to come and come after their money. But in practice then becomes this kind of veil they hide behind and it attracts the wrong kind of clients, I think. I'm sure there are good clients who want privacy as well, but there are many, many others who say, actually, this is really handy. If I can put my money in Switzerland and nobody needs to know where it is and nobody knows who I am, then that's great.

sanctions, I think, is an interesting one, because it's not just Credit Suisse, right, that breaches sanctions. Actually, kind of a lot of other banks do it too. I think Credit Suisse gets caught, you know, and I think it's worth exploring what they did, because I think some of the behavior is really egregious. But actually, a lot of other banks breach sanctions too, you know, not just in Switzerland, actually, you know, in the UK and in France and in the US too. So, you know, which brings up sort of an important point that, you know,

Credit Suisse isn't the only bank with scandals. The difference with Credit Suisse is they have all the scandals. Most of the other banks have some of them, but Credit Suisse has the lot. And that's really interesting. Why is it always Credit Suisse? Well, let's talk a bit about Switzerland.

Because I think that's a very important kind of theme, isn't it? We've mentioned a bit about it already, Swiss neutrality, but talk to us a bit, Duncan, about Swiss banking culture. And I guess especially the strange position that Credit Suisse is in, where it's got UBS kind of looming over it, where it always seems to be trying to outdo or merge with and never quite managing to do either. Yeah, it's fascinating, right? I mean, I think, first of all, you know,

I'm no expert on Swiss culture, right? I'm not a Swiss historian or Swiss sociologist or something. But I have obviously picked up some stuff about Switzerland, thinking about this book and also talking to people there a lot. And I think it's a first distinction that I think is really important is like from the outside, we think of,

When we think of Switzerland, we think of banking and a bunch of other cliches. Actually, banking is only really it's kind of a Zurich thing. And, you know, Switzerland is made up of all the cantons and banking is really unique to Zurich. And in other parts of Switzerland, they don't necessarily love the idea that their country is kind of perceived as this hub of banking.

And then secondly, I think it's important to say that a couple of hundred years ago, Switzerland was kind of an economic backwater. It was kind of this place that was forgotten in Europe as other countries, Germany and France and the UK and even Italy, were kind of developing economically. Switzerland was really in danger of falling behind. And they sort of developed a banking industry.

as part of a sort of move to make sure they weren't forgotten. The result of which has been that the banks have become kind of outsized. You know, I mean, these are enormous banks in a relatively small country. And the comparable place, I suppose, would have been like Iceland in the run up to the financial crisis, where they also had a huge banking sector, which when it crashed, crashed the whole country. And I think that has kind of loomed over Switzerland for a long time, that you've got these two enormous banks,

and some others. And, you know, that's a lot, putting a lot of eggs in one basket. I think the rivalry with UBS is really fascinating because UBS is sort of also has its scandals, you know, in the financial crisis, UBS needs a bailout from the Swiss government. Credit Suisse kind of famously and is very fiercely, executives there were fiercely proud of the fact they didn't take a government bailout.

After the crisis, UBS has a big rogue trader scandal in London. So UBS has its problems too. But generally speaking, UBS is a little bit more straight-laced. It is a more successful bank within Switzerland, I think it's fair to say. And there are these two rivals. And I think being second best probably is...

part of what pushes Credit Suisse to sort of take on more risk, trying to catch up with its rival. You're right, there were mergers talked about over and over and over again. It's almost like every other year somebody's talking about a merger. Most of the time, it never happens. I think often that's because of the egos involved more than a rationale. But I think there's also a case that if two big banks is a challenge for Switzerland, then one enormous bank is even more of a challenge

You know, don't want to leap too far ahead. But in the end, you know, Crosby is thrust into the arms of its big rival. And that is the challenge for Switzerland right now. Indeed. And yeah, there's two ahead of ourselves, Duncan. We're not quite there yet. But no, it's so funny the way that those talks always begin. They always get leaked.

And then it all falls apart. Like every year, the same kind of merry dance happens again. But it's not just to do with Switzerland or Swiss banking culture, is it? Because the other half of this is the investment bank in the United States, a bank that continues to answer the phone Boston first.

And I mean, and this is going to sound very naive, but that culture seems to be just characterized by a monstrous and overwhelming obsession with money. They just seem to be absolutely rapaciously greedy and receiving the most unbelievable, staggering kind of bonuses, even when the bank actually isn't doing that well.

Yeah. So a couple of things to say. One, if you talk to people who work at First Boston, they loved it. People are really proud of the fact they worked at this bank. It was sort of perceived within banking as one of the best places to be, not just because of the money, but because they were also willing to do kind of funky things and really try new stuff. So people really loved it.

I think you're right, though, to point to the money. And it's one of the reasons for me for writing the book. You know, as a financial journalist, you can kind of become a bit inured to it. Like the amounts of money knocking around in their world are just so extraordinary. But it's so commonplace in their world that it becomes kind of normalized. And I think it's important in books like this to kind of talk about it because actually it's really odd. You know, I mean, it's unusual. And as you say, people are taken away kind of...

People who are not successful and sometimes end up in court for all sorts of problems walk away with hundreds of millions of dollars. I mean, it's extraordinary money. It's like winning the lottery over and over and over again and being accused of fraud and just saying, oh, it's okay because I made so much money. And I think you do have to wonder how much does that skew people's behavior? So if you can make $10, $50, $100 million in a short space of time,

Very short space of time even if things go wrong for you You know is it worth pushing the envelope and some people clearly think it is so some people will say you know if I can make 50 million dollars in the space of five years and then I get canned because you know I did something wrong. Well, so what I made like I won the lottery right and so I think that money the salaries enough for the bonuses on offer are you know a really big part of what goes wrong here and

You know, and in the end, you sort of see that the top executives are taking out so much money when the bank isn't making any profit either, which is just, you know, it's unbelievable, really. It is unbelievable. These are violent criminals, so they're not going to go down easy. ABC Tuesdays. Let's get this done. Do it!

The Rookie is back. We have two new rookies starting today. Howdy. Being a cop is stressful 24-7. Every year on the job is different. And training day. We have a serial killer at large. Never ends. The Rookie. All new Tuesdays on ABC and stream on Hulu.

The NFL playoffs are better with FanDuel because right now new customers can bet $5 and get $300 in bonus bets if you win. That's $300 in bonus bets if you win your first $5 bet. FanDuel, an official sportsbook partner of the NFL.

21 plus and present in select states. First online real money wager only. $5 first deposit required. Bonus issued as non-withdrawable bonus bets which expire 7 days after receipt. Restrictions apply. See terms at sportsbook.fanduel.com. Gambling problem? Call 1-800-GAMBLER.

Be honest. When's the last time you had a homemade meal? We get it. Between meetings, workout classes, and the kids' after-school sports, who's got time to cook? That's where HelloFresh comes in. No matter how busy you get, HelloFresh has everything you need to get an easy, home-cooked meal on the table with fast,

flavor-packed recipes like Parmesan herb-crusted salmon. You'll be filling your kitchen with the cozy aromas of a homemade meal in no time. So go ahead, try HelloFresh. It's homemade, made easy. Learn more at HelloFresh.com.

OK, so we've had the Nazi gold. We've had the big merger with the US investment bank. We had money laundering and other kind of scandals already breaking. Let's move our timeline up to the financial crisis because Credit Suisse kind of weirdly has a soft landing, doesn't it, compared to other banks at that point? It does. And they're very, very proud of it. So they kind of get through it.

I mean, look, in the context of the financial crisis, they have a soft landing. They don't have they don't collapse and they don't need a government bailout. However, they do take a bailout from a Gulf state that gives them billions of dollars. And I've always sort of felt like the argument that some banks make, well, my bank didn't need a bailout is kind of false because the entire industry got bailed out.

The US government essentially bailed out the entire banking industry. And that might be a good thing or a bad thing, and you can argue either way. But it's kind of false to assume they were fine. They would have been just fine without any help. That's not really true. I think the other thing that I thought was interesting was part of the reason they didn't get hit with losses that were as big as some of the other banks is because they were...

you know, very much involved in the sort of derivatives and subprime mortgages and things that created the crisis in the first place. So they sort of knew it was coming. They could see it was coming and they got out. And so then to kind of crow about, oh, well, we didn't get hit, you know, as bad as others feels a bit disingenuous when in fact you kind of caused it.

And there's only really one top sort of even close to a top bank executive in banking in the UK or the US or Switzerland who goes to jail as a result of the financial crisis. And it's a guy at Credit Suisse. So he's a sort of trader in London who ends up in jail. Well, that's it. So yeah, they came out of this better than some other banks. And certainly, their reputation was slightly enhanced. But-

actually, they did have a role in it. And, you know, they also did some bad stuff. But certainly, yeah, I mean, there were others, clearly others collapsed and they had a worse time. And then, you know, as we're walking down the road now towards the kind of looming catastrophe on the horizon, they get hit by, I think, like two...

even by their standards, kind of enormous scandals. One that I'm sure almost everyone listening to this would have heard of, Greensill, and one perhaps slightly less visible, slightly less famous, is it Archegos? Yeah, yeah. Tell us about Greensill, because that really, due to David Cameron's involvement, got dragged right into the middle of the British press, didn't it? Yeah. Yeah.

So I think you're right. So we've skipped a couple of scandals. There's too many, Duncan. There's too many scandals. It's hard to cover all the scandals. The book skips a few scandals because I just couldn't fit them all in. But yes, I think you're right to pinpoint those two because I think they are critical to what happens at the end. And...

Green Cell is really interesting. So Green Cell, you know, for those who don't know everything about it, essentially is a Lex Green Cell is this Australian farmer come financier sets up this business that does something called supply chain finance. It's a little bit arcane, probably not worth getting into now, but it's essentially funding for small businesses in Australia.

They're dealing with larger businesses. And he funds this business, he funds this, the loans that he makes by going out to big investment managers and saying, if you give me the cash, I'll loan it out to these businesses. And he blows up with one Swiss asset manager, a company called GAM. And then he...

Instead of collapsing, which maybe should have happened at that point, he goes and relaunches essentially with Credit Suisse. And Credit Suisse in the end puts $10 billion of their clients' money into funds that invest in loans that Lex Green sells sources.

That business collapses, so completely collapses. And when it does, it becomes really clear that some of these loans are not very good. You're right. David Cameron was essentially an employee of the company. Lex Greensill had been sort of involved in government as an advisor on how he helps small businesses. And he'd really used that position to enhance his own business. And then David Cameron, out of office, had joined Lex Greensill.

So when the company blew up, that really helped that story become a mainstream story. You know, I've been following it for a few years as a finance story. But because of Cameron's involvement in the UK, it became more mainstream. And especially because it turned out that during COVID, Cameron had been lobbying some of his former colleagues to get access to special COVID loans and things to help Greensill's business along.

So anyway, why that story is really important for Credit Suisse? You know, they're losing billions of dollars all over the place. So why is this one important? I think why this one is important is because most of the scandals involve Credit Suisse losing their shareholders' money. So, you know, they blow up and it's a hit to their profits. And that's shareholders' money, essentially. In this case, they lose $10 billion in

They get some of it back eventually, but they lose this money and it's their client's money. This is not their shareholders. This is customers who've given their money to Credit Suisse. And so that's really important because those customers then start to feel like, I'm not sure I can trust this bank with my money anymore. I think I might go elsewhere. And that's what they do. In the next few years, they start to go elsewhere. There's another element, which is that they're

Greensill's biggest investor is a company called SoftBank, who you probably know. And SoftBank is a big part, big relationship for Credit Suisse. And so when that company, when Greensill blows up, it kind of ruins that relationship too. So they've sort of destroyed, it's just destroyed relationships all over the place. So it's cost them money, but mostly it's, I think it's important because it's destroyed a lot of relationships. And then you have our key goals.

Yes. And what I found astonishing about this is that I think at one point the realisation was that the exposure was half of Credit Suisse's entire capital base. And it was an organisation that the board hadn't even heard of. And that seemed to reflect...

this systemic problem, which we haven't actually spoken about much, but to do with risk and what information, in fact, was being kind of fed to senior decision makers. They seem to have both been swamped with detail, but then also were not being told that really, really key kind of exposures of risk factors at exactly the same time. Yeah, I think you're right. So Archegos is interesting for a different reason to Credit Suisse for me. So to green cell start, sorry. I think the thing with Archegos is that

It is massive. When it blows up, it exposes the fact that the risk culture is not really there. And so you've sort of, in quick succession, these two, Greencel and Archegos, happen within days of each other, by the way. So on the one hand, you've got Greencel that sort of says to clients, you can't trust us with your money. And then days later, you get this other blow up where they've essentially been lending money to a hedge fund that shows that, and they've loaned too much, and the hedge fund blows up, that says...

Actually, our risk culture doesn't really exist. It's not very good. It's much worse than other banks. And it costs them $5 billion. I mean, it's incredible amounts of money. It's interesting. I mean, to some degree, they get a little bit unlucky, right? Like a bunch of banks are also lending money to Archegos. When Archegos blows up, they get their money out quicker than Credit Suisse. So you could say that's bad luck, or it could be this risk, lack of risk culture. There's an element of the story, which is like deeply human, which I think is

also sort of tells you something, right? So they're sort of in their dealings with a hedge fund like Archegos. You kind of have two people. You have a key person who is trying to sell to Archegos and sell them as much lending as possible. And you have another person who is responsible for managing the risk that comes with that relationship. And not long before Archegos blows up, the risk guy dies in an unfortunate skiing accident.

And what you would think is you would put another risk guy in place, but actually they take the sales guy and make him the risk guy. So the guy who's been until very recently responsible for saying to Archegos, give us as much of your business as possible, is suddenly overnight the guy responsible for saying, actually, you know, we better slow down here. And so I think if you think of that on a really human level, that's just an incredibly hard thing to do. And I think that decision to make that guy suddenly a different guy is kind of

you know, it's symbolic of how Credit Suisse makes these decisions and they don't work out. It's completely astonishing. And by the way, everyone before we weren't joking when we're saying there are too many scandals for us to cover. I mean, they'd literally, I can't believe with Duncan, there are actually too many scandals for you to put in the book. That is mind boggling. Yeah. I mean, you know, we could talk about the Bulgarian cocaine, uh,

Bulgarian wrestlers with the cocaine smuggling. We haven't talked about the Mozambique Tuna Bond scandal, which I think is fascinating and really illustrates the lack of risk culture. You know, there's the guy, Patrice Lescaudron, who rips off the prime minister of Georgia. I mean, it goes on and on and on and on. And this is, you know, I think this is what's really interesting about Credit Suisse is that it's just relentless.

um you know i think as a reputational management kind of story it's really really fascinating and then and this is what i just love about this whole story is this kind of brittle kind of facade of like respectability and then so all that that list i mean it's so sordid so much of this stuff

It is, yeah. I think you're right. It's bizarre that they continue to do it over and over and over again. I think what happens is, you're right, it leads to this sort of

damage that means they're really brittle and fragile and so actually in the end it doesn't take much you know I don't know if we want to get there we're there we're there okay well I mean in the end what kills them really is a tweet right I mean bizarre right it's like the the the

This massive bank with tens of thousands of employees has been around 167 years. And a guy in Australia tweets something. A journalist in Australia tweets a fairly innocuous tweet that doesn't even mention them, but says, I think a global investment bank might be in trouble, essentially. And people say, well, it's got to be Credit Suisse. And within seconds, people are withdrawing hundreds of millions of dollars. And within a few days, it's $100 billion that's come out of this bank off the back of a tweet.

And it doesn't make any sense unless you think about all the scandals that got us there. And then it's like, oh, OK, people are pulling their money out because this bank's reputation is in the gutter. Why would you leave your money there?

The tweet might not be that meaningful except for all this other stuff that exists already. You call it the first major digital bank run. And I suppose the other aspect is just how easy it is in that moment for people just to log into some kind of investment portal and just, you know, at the flick of a wrist, suddenly just move their money to another bank.

Yeah, I think that's a really important new development, right? That even in the financial crisis, if you remember the financial crisis, which seems not that long ago, but we still had images of people lining up in the street, like actually, you know, real humans in the street outside Northern Rock in the UK or other banks around the world to get their money out. Well, nobody really needs to do that anymore, right? You just get on your phone and move it somewhere else.

Even if you've got a lot of money in the bank, you can do that. And maybe if you've got a lot of money, maybe it's even easier to do that. But I think, yeah, that is a real worry, right? And it sort of led to some real soul searching, I think, among regulators. Like, how do we deal with this? If a tweet...

can lead to this. And if people can move their money so quickly and so easily, so seamlessly, then we have a bit of a problem. Because it sort of gets at what's like a fundamental that we don't really like to talk about in the way our banks work, which is that they take in our money and they lend most of it out and

You know, what's in the bank at any given time is only a small proportion of the entire money that they actually owe back to their customers. If we all ask for it back, the bank's finished. You know, that's the truth. And we kind of don't like to talk about it because it's really uncomfortable. But it's the truth. And so, you know, with what Credit Suisse revealed is that even in a massive, massive bank like this, you know, that can happen really quickly now because of technology.

Well, I hope this interview isn't going to spark some kind of bank run. Well, they don't have all our money. So the moment when it comes then is one which is kind of both frenetic and instantaneous. But also, I mean, given everything we've spoken about, it just has this crushing sense of inevitability, doesn't it?

Yeah, I think so. It's tough to see a way out in the last few months. One of the things that I think is really important is because of the scandals, they've kind of churned through executives. They've changed a CEO, they've changed a chairman. Right at the end, they've got a new CEO, a new chairman, a new CFO, a new chief risk officer. They've got a new head of communications, a new chief legal counsel. Everybody's new. Everybody's been there just a few months, really.

And so they're having to deal with this bank that is falling apart at the seams. And they're sort of coming up with new strategic reviews and things. Nobody really believes any of it. Nobody really believes that they have a plan to turn it around or if their plan could plausibly work. And so...

It does feel really inevitable. And I think what really happens is, I talked about this sort of customers losing trust and their investment banking clients losing trust. But I think what really happens in the end is that the Swiss finance minister, a woman named Karen Keller Suter, who takes over, she's also new in her job, right? So she takes over in January. And she, I think, looks around and says, do I trust these guys to fix this bank?

And I think, you know, understandably says, well, they're all new. The bank's a mess. It's one scandal after another. I don't really trust it. So then it then it's finished. Right. Like you can't continue if you don't have the backing of the Swiss authorities. It's kind of over at that point. And how does it end?

And it ends with, you know, a deal for Credit Suisse to be taken over by its great rival UBS and like the, you know, the ultimate humiliation to be forced for a fairly meager sum, a few billion dollars into the hands of its rival UBS, which is, you know,

means UBS gets an incredible deal. There's been this talk, as you said, for years and years and years, there's been talk about merging these two banks. It's always been too complicated, too many egos, it's going to be too expensive. And here, they suddenly get it for a song, really. And that's the end of Credit Suisse, the history of this bank finished in a matter of a few hours.

What's astonishing is in that press conference, because the markets are very jittery, aren't they, at this point in general? And obviously the Swiss government's intervening in part to try and avoid any kind of echoes of the financial crisis 2008, like systemic breakdown, aren't they? So they're opening vast lines of credit and trying to reassure investors. But what's astonishing is that they only decide to put someone from Credit Suisse into that press conference announcing at the last minute that

That before that, it was like they didn't deserve to be on that stage. Everyone else had to step in to deal with their mess. Yeah.

Yeah, yeah, yeah, yeah. I think you're right. I mean, the Swiss authorities were getting really frustrated with the executives at Credit Suisse at that point. They felt like they really had their heads in the sand, you know, kind of acting as though, yeah, we've got a bit of a problem, but we'll turn it around. You know, if everyone just gets behind our plan, it'll all be okay. Meanwhile, the Swiss authorities are kind of going, no, you're collapsing and you could take the entire Swiss economy with you and that could lead to another financial crisis. And you're right, the context for this is,

It's kind of sometimes these moments come and go, but the context for it is like a couple of banks have collapsed in the US at that point. And there were worries in the US about a larger banking crisis that could be an echo of the financial crisis. I think genuinely people were worried.

in Switzerland, in London, in New York and Washington, you know, that things could get out of control. We'd seen Janet Yellen and Joe Biden step up and say, we've got the back of all the banks here. You know, that was their attempt to kind of stop people panicking. And the Swiss did their version of that. You know, there was a there's definitely a debate in Switzerland.

There are some people who say, if only our finance minister had stood up and said, we've got Credit Suisse back, we could have avoided this.

I just don't really buy that. I think, you know, that would have been an extraordinary thing for her to say, for the finance minister to say, given everything that had happened, why should she have the back of this bank that repeatedly is embarrassing the entire nation? So it's just sort of implausible. And in fact, the solution they come up with in the end is basically to try and nip the whole thing in the bud before it gets out of control. Well, we're almost out of time. But Duncan, final question for you.

You know, I think we always look back at these disasters searching for the kind of parable, don't we? Searching for the kind of lessons, the kind of things that we can draw out, which might be useful or helpful in the kind of years ahead. And I'm sure this won't be the last time that international markets jitter or banks commit assorted scandals. What to you is the kind of loudest...

theme or lesson to draw out of this story? I mean, is it about culture or governance or risk? Is it a technical thing to do with capital liquidity? There's a whole bunch of things one might draw out. But what, when you were writing this, kind of leapt out at you the most?

Yeah, it is that thing about culture and behavior. You know, I think what tends to happen in banking, and it's happening right now, right? So you have this bank collapse, you had some banks collapse in the US, and the debate quickly goes to the things that regulators always do. So they talk about capital ratios and liquidity coverage ratios. That wasn't what killed Credit Suisse. What killed Credit Suisse was

terrible conduct over decades by its employees that meant that the bank had no reputation, that there was a sense that it could get away with whatever it wanted. The result of which was one executive after another gets fired for sometimes things to do with banking, sometimes not. We didn't even talk about the spying stuff or the COVID breaches that top executives go for. The point really for me is that conduct really matters. Behaviour really matters.

In the end, you have to deal with it, otherwise it will destroy your business. - Well, there was so much we did not discuss, all of which is every bit as kind of juicy and interesting and important as all the things we did discuss. Not least, private investigators trailing former executives around.

around various cities so everyone if you do want to learn about all of that then you need to go and get a copy of Duncan's book it is a meltdown scandal sleaze and the collapse of Credit Suisse which is available now of course online or at a bookshop near you Duncan thank you so much this has been a really really fascinating talk I've been Carmilla and you've been listening to Intelligence Squared thanks everyone so much for joining us

Thanks for listening to Intelligence Squared. This episode was produced by myself, Mia Cirenti, with additional production and editing by Bea Duncan.

Obtaining your SOC 2 or ISO 27001 certification can open those big doors, but they take time and energy, pulling you away from building and shipping. That's where Vanta comes in. Vanta is the all-in-one compliance solution helping startups get audit ready and build a strong security foundation, quickly and painlessly.

Vanta automates the manual security tasks that slow you down, helping you streamline your audit. The platform connects you with trusted experts to build your program, auditors to get you through audits quickly, and a marketplace for essentials like pen testing.

So whether you're closing your first deal or gearing up for growth, Vanta makes compliance easy. Join over 8,000 companies, including Y Combinator and Techstar startups who trust Vanta. For a limited time, get $1,000 off Vanta at vanta.com slash simplify. That's V-A-N-T-A dot com slash simplify for $1,000 off.