WEBVTT - Why Credit Suisse Was a Magnet for Scandals 0:00:03.080 --> 0:00:09.440 Bloomberg Audio Studios, podcasts, radio news. David, for anyone that 0:00:09.560 --> 0:00:13.920 questions my dedication to covering global finance for Bloomberg, I 0:00:13.960 --> 0:00:14.880 have a statistic for you. 0:00:15.120 --> 0:00:17.239 I'm sure no one dares question that fancy, but hit me, 0:00:17.280 --> 0:00:18.360 what's a stat. 0:00:18.320 --> 0:00:22.400 Since twenty fourteen, critis sweet c suite, mainly chief executives 0:00:22.440 --> 0:00:26.400 and chairman have given me thirty seven around thirty seven interviews, 0:00:26.720 --> 0:00:28.840 so we show up at every quarter to speak to them. 0:00:28.920 --> 0:00:31.920 We had many exclusives with various chief executives to trying 0:00:31.960 --> 0:00:34.720 to understand what was going on, and then boom, it 0:00:34.760 --> 0:00:35.480 got taken over. 0:00:35.600 --> 0:00:37.360 I mean that's going to be some sort of record, 0:00:37.360 --> 0:00:40.080 hasn't it in terms of the number evinties. Also tells 0:00:40.080 --> 0:00:41.720 you a bit about the company, though, doesn't it. Because 0:00:41.760 --> 0:00:44.559 there was so much going on, so much to report on. 0:00:45.120 --> 0:00:47.919 I mean, you had to chase the chief executives, as 0:00:48.080 --> 0:00:51.199 the chief financial officers to try and explain or defend 0:00:51.360 --> 0:00:52.640 perhaps what was happening. 0:00:52.360 --> 0:00:54.720 Probably defend. I mean there were a lot of scandals, 0:00:55.160 --> 0:00:57.400 and so we tried to keep on top of the story. 0:00:57.440 --> 0:00:59.440 And I remember sometimes in certain interviews I kept on 0:00:59.440 --> 0:01:01.320 thinking out the back of my mind this would be 0:01:01.360 --> 0:01:03.520 a great Netflix show, but it's a book. 0:01:03.640 --> 0:01:05.840 Maybe it should be a Netflix show one day. I mean, 0:01:05.880 --> 0:01:09.000 it is truly one of the great stories of business, 0:01:09.040 --> 0:01:12.640 of scandal, of failure. Over the last few years, we 0:01:12.640 --> 0:01:15.039 were all gripped by it here at Bloomberg, And in 0:01:15.080 --> 0:01:16.720 this week's episode of In the City, we're going to 0:01:16.720 --> 0:01:18.680 talk to perhaps the only person in the room here 0:01:18.720 --> 0:01:21.119 in London who's nerded out even more than New fran 0:01:21.200 --> 0:01:23.640 scene on Credit Swiss, and that is our very own 0:01:23.800 --> 0:01:27.840 Weekend Edition editor Duncan Mavin, whose book covers all the 0:01:27.880 --> 0:01:31.319 scandal's twist turns and the ultimate collapse of Credit Swiss. 0:01:34.480 --> 0:01:37.000 Welcome to the City of London, the City of the 0:01:37.040 --> 0:01:43.120 City of the City of London. Mind the gap between 0:01:43.120 --> 0:01:52.120 the and the financial hearts of the country, the city, 0:01:52.400 --> 0:01:59.040 the City. Welcome to in the City, clear of the doors. 0:02:00.360 --> 0:02:02.680 I'm Francin Laqua and I'm David Merritt. Well with us 0:02:02.680 --> 0:02:02.880 in the. 0:02:02.880 --> 0:02:05.760 Studio is Duncan Maven, Bloomberg editor and also best selling 0:02:05.800 --> 0:02:09.720 author of Meltdown, Scandal, Sleeze and the Collapse of Credit Sweez, 0:02:09.880 --> 0:02:13.680 which published earlier this year. Welcome Duncan, Thank you so 0:02:13.800 --> 0:02:18.360 Duncan you've joined Bloomberg. It's been six months. And before that, 0:02:18.400 --> 0:02:20.720 I mean you covered Credit sweez for years, decades. 0:02:21.320 --> 0:02:24.000 Yeah. I was an editor and a reporter for a 0:02:24.000 --> 0:02:27.240 long time, covering banks in Europe and around the world, 0:02:27.240 --> 0:02:30.400 and Credits Sweets was prominently in the news, often for 0:02:30.600 --> 0:02:33.480 bad reasons. So I was all over them for a 0:02:33.480 --> 0:02:33.840 long time. 0:02:33.919 --> 0:02:36.800 Yeah. So what prompted you to write this book. 0:02:37.040 --> 0:02:39.400 I sort of got into it through one of the scandals, 0:02:39.440 --> 0:02:41.560 the Green Salt scandal. Had written a book about that, 0:02:41.639 --> 0:02:44.240 and that Credit Sweet was really at the heart of it. 0:02:44.240 --> 0:02:46.080 And actually I think that scandal was a really big 0:02:46.240 --> 0:02:48.839 factor in Credit sweet Is downfall, and so I sort 0:02:48.840 --> 0:02:50.680 of knew a lot about the culture and things that 0:02:50.720 --> 0:02:53.440 went wrong there. And then when Credits Sweets collapsed, it 0:02:53.520 --> 0:02:56.600 was just this crazy story of scandal after scandal after scandal, 0:02:56.680 --> 0:02:59.520 relentlessly they were getting into trouble, and it felt like 0:02:59.560 --> 0:03:01.400 it kind of symbolized a lot of things that go 0:03:01.480 --> 0:03:03.400 wrong in banking, or can go wrong in banking. 0:03:03.639 --> 0:03:07.399 Duncan Green Selle. It was you know, this also implicated 0:03:07.440 --> 0:03:10.000 the UK, maybe more than other scandals, but it was 0:03:10.040 --> 0:03:11.440 a big deal. Remind us what happened. 0:03:11.760 --> 0:03:13.760 Yeah, So it gets a bit complicated. It's about this 0:03:13.760 --> 0:03:16.200 thing called supply chain finance, which we probably shouldn't get 0:03:16.200 --> 0:03:19.080 into because it's really arcane and difficult to talk about. 0:03:19.080 --> 0:03:22.280 But essentially Credit Sweet loan ten billion dollars of their 0:03:22.320 --> 0:03:25.240 client's money to have failed the UK financier named lex 0:03:25.240 --> 0:03:28.119 screen Cell, who was working with David Cameron, the former 0:03:28.200 --> 0:03:30.160 Prime Minister. So it blew up into a big kind 0:03:30.160 --> 0:03:33.880 of mainstream news story and all of the ten billion 0:03:33.960 --> 0:03:37.160 dollars was frozen. Clients got some of it back, not 0:03:37.320 --> 0:03:39.400 all of it back, and it turned out a lot 0:03:39.400 --> 0:03:41.720 of the money was invested in kind of real garbage stuff. 0:03:41.760 --> 0:03:43.680 It was supposed to be really safe and it wasn't. 0:03:44.480 --> 0:03:47.120 So that was a real sign that they were entrusting 0:03:47.160 --> 0:03:49.920 their clients' money and things that weren't great, and that 0:03:50.080 --> 0:03:52.480 was a real sign things were not good at Credit SUITEZ. 0:03:52.880 --> 0:03:56.160 Can we step back further in time, then, so the 0:03:56.200 --> 0:04:00.400 bank collapsed earlier on in twenty twenty three, but this 0:04:00.600 --> 0:04:03.800 succession of scandals that built up to its final implosion. 0:04:04.080 --> 0:04:06.520 Can we trace back to the origins Which of these 0:04:06.520 --> 0:04:09.360 scandals first emerged that showed that this bank was really 0:04:09.400 --> 0:04:09.840 in trouble? 0:04:10.480 --> 0:04:12.320 So yeah, in my book, I go right back to 0:04:12.360 --> 0:04:15.040 the start one hundred and sixty seven years ago. And 0:04:15.080 --> 0:04:16.840 when you look at the start, even at the start, 0:04:16.839 --> 0:04:20.440 Alfred Esher, who's this Swiss kind of icon who founded 0:04:20.440 --> 0:04:22.880 the bank. Even his family has kind of involved in 0:04:22.920 --> 0:04:25.719 financial scandals. His grandfather loses a whole load of money 0:04:25.720 --> 0:04:28.000 in a trading scandal in the early nineties. It was 0:04:28.000 --> 0:04:29.880 sort of in the DNA from the start. It is 0:04:29.960 --> 0:04:31.919 kind of in the DNA, yeah, you know. And I 0:04:31.920 --> 0:04:34.400 think Credit Sweets then becomes kind of the second biggest 0:04:34.440 --> 0:04:37.599 bank in Switzerland, and this a second tier investment bank 0:04:37.640 --> 0:04:40.000 when it merges with a US investment bank, and so 0:04:40.040 --> 0:04:42.279 it's kind of always pushing to try and be better. 0:04:42.520 --> 0:04:44.159 And I think that's one of the reasons that it 0:04:44.320 --> 0:04:47.279 kind of always is just pushing the envelope and getting 0:04:47.320 --> 0:04:49.560 into trouble. But then they have, you know, a lot 0:04:49.600 --> 0:04:52.560 of scandals after that. So in the in the seven 0:04:52.720 --> 0:04:55.640 sixty seventies is one called the Kiaso affair, which involves 0:04:55.680 --> 0:04:58.000 money coming from Italy over the border and they kind 0:04:58.040 --> 0:05:00.160 of putting it in a branch and then use it 0:05:00.160 --> 0:05:02.479 in a kind of Ponzi scheme way, and that blows up, 0:05:03.000 --> 0:05:05.360 and then you know there's a There are more through 0:05:05.400 --> 0:05:08.480 the nineties involving a group called the Flaming Ferraris. Here 0:05:08.560 --> 0:05:11.360 these traders in London who who blow up, and there's 0:05:11.360 --> 0:05:14.640 a bunch of scandals in Japan where they're they're shredding 0:05:14.680 --> 0:05:15.799 documents in Japan. 0:05:16.080 --> 0:05:17.960 You mentioned the Flaming Ferraris. Can we I think we 0:05:18.120 --> 0:05:19.960 just kind of did a little sidetrack on that because 0:05:19.960 --> 0:05:22.479 it's wasn't it your local restaurant front scene nam Loong 0:05:22.520 --> 0:05:24.839 where you could do Did you ever have a flaming Ferrari? 0:05:25.400 --> 0:05:27.440 I mean I can either confirm nor deny that I 0:05:27.600 --> 0:05:30.840 had flaming Ferraris in my youth. I thing most people have. 0:05:31.200 --> 0:05:33.400 This is the cocktail that you drink that's on far right. 0:05:33.400 --> 0:05:35.719 Don Can you tell us what the Flaming Ferrari gang were? 0:05:35.839 --> 0:05:38.120 So this was a group of high profile traders in 0:05:38.160 --> 0:05:40.480 London who in the late nineties, who were like the 0:05:40.480 --> 0:05:43.360 most celebrated in the city, and they used to go 0:05:43.440 --> 0:05:45.200 to this restaurant and drink this drink and they were 0:05:45.200 --> 0:05:48.040 on the front page of all the newspapers wearing their 0:05:48.080 --> 0:05:50.760 tuxedos and being really flashed and getting into Ferraris and 0:05:50.800 --> 0:05:53.559 so on, and driving around and and they were making 0:05:53.600 --> 0:05:55.480 more money than anybody else, and it turned out they 0:05:55.480 --> 0:05:57.240 were essentially inside of trading. 0:05:57.200 --> 0:05:59.120 There would go flamed out love it. 0:06:00.360 --> 0:06:02.000 I mean. The big one in the nineties for me, 0:06:02.080 --> 0:06:04.160 which kind of becomes a bit of a cliche, but 0:06:04.200 --> 0:06:06.600 I think is really worth talking about is how not 0:06:06.640 --> 0:06:09.440 just Credit Sweets but the Swiss banks in general, it's 0:06:09.720 --> 0:06:12.159 revealed how much they've been dealing with the Nazis and 0:06:12.320 --> 0:06:14.680 during the war. I think this is partly in their 0:06:14.760 --> 0:06:18.240 DNA because there's this banking privacy law in Switzerland that 0:06:18.560 --> 0:06:21.880 our secrecy law that enables them to kind of take 0:06:21.920 --> 0:06:25.320 in money from the Nazis, but also prior to the 0:06:25.360 --> 0:06:29.080 Second World War, they've taken money from Jewish victims of 0:06:29.200 --> 0:06:32.479 Nazism around Europe and then they kind of they keep 0:06:32.520 --> 0:06:34.720 that money and right through to the nineties until some 0:06:34.800 --> 0:06:37.560 American investigators come and say, hey, you know, you've got 0:06:37.560 --> 0:06:40.719 a bunch of money that was from Holocaust victims. Shouldn't 0:06:40.760 --> 0:06:44.560 you give it back? And Credits Sweets isn't the only one, 0:06:44.600 --> 0:06:46.400 but Crows Sweet is right at the forefront of trying 0:06:46.400 --> 0:06:48.719 to cover up what they've done during the war, So yeah, 0:06:48.760 --> 0:06:51.360 that scandal, and then you just kind of roll into 0:06:51.520 --> 0:06:54.680 the last twenty five years where it becomes really relentless. 0:06:54.800 --> 0:06:57.200 It's like a year after year after year there's a 0:06:57.240 --> 0:06:59.640 new scandal, like Credits sweets the d archae goos. 0:06:59.680 --> 0:07:02.360 I mean, number of scandals goes back to the heart 0:07:02.400 --> 0:07:06.120 I guess of risk taking. Yeah right, but UBS also 0:07:06.279 --> 0:07:09.560 had skeletons in their closet in the like the eighties nineties. 0:07:09.960 --> 0:07:13.240 So why did YOUBS clean up and Critisweez kept on 0:07:13.320 --> 0:07:14.880 taking these big, risky bets. 0:07:15.000 --> 0:07:15.200 Yeah. 0:07:15.240 --> 0:07:17.120 I think it's a really good point, right. The Credit 0:07:17.160 --> 0:07:20.600 Suite definitely has a lot of scandals. It's not the 0:07:20.640 --> 0:07:23.320 only bank. You know, a lot of banks breach sanctions. 0:07:23.720 --> 0:07:25.480 Cit seez isn't even the worst on that. A lot 0:07:25.520 --> 0:07:27.640 of banks have big road traders. UBS has one of 0:07:27.640 --> 0:07:30.280 the worst. A lot of banks have scandals. The difference 0:07:30.280 --> 0:07:32.760 with Credit Sweez is that they're relentless, that they're year 0:07:32.800 --> 0:07:35.880 after year after year after year. Most banks, some scandal happens, 0:07:35.920 --> 0:07:38.720 they try and tidy up, and UBS's case, I think 0:07:38.720 --> 0:07:42.720 in particular because of the financial crisis, they have this moment, 0:07:42.800 --> 0:07:45.360 you know, they take a government bailout and Credits Suite 0:07:45.480 --> 0:07:47.680 sort of proudly says it didn't take a government bailout, 0:07:47.880 --> 0:07:50.560 but ubs had to because of that, I think they 0:07:50.560 --> 0:07:53.200 get a chance to kind of restructure and wipe the 0:07:53.280 --> 0:07:53.880 slate clean. 0:07:54.320 --> 0:07:57.400 When there's a big crisis or there's a big scandal, 0:07:57.760 --> 0:07:59.120 you have to go to the heart of why it 0:07:59.200 --> 0:08:01.280 was started. Is it because they didn't see it so 0:08:01.400 --> 0:08:03.480 o kags. They just didn't see it and they thought 0:08:03.480 --> 0:08:06.200 he was legit. Or is it because they turned to 0:08:06.280 --> 0:08:08.800 blind eye and said, well, it's worth it because returns 0:08:08.840 --> 0:08:11.040 are big. We need the money, we need to press shareholders, 0:08:11.320 --> 0:08:12.720 so we'll go ahead and do it. Anyway. 0:08:12.880 --> 0:08:14.720 Yeah, I think it's a bit of both. So let's 0:08:14.720 --> 0:08:18.280 talk about the Mozambique Tuna bond scandal, which is they 0:08:18.600 --> 0:08:21.480 do a deal with some a Lebanese company that is 0:08:21.560 --> 0:08:25.520 building infrastructure from Mozambique, and they get a report done 0:08:25.560 --> 0:08:29.280 by an investigator into the most the Lebanese company to 0:08:29.360 --> 0:08:31.680 say should we do business with these guys? And the 0:08:31.720 --> 0:08:34.200 report comes back and it calls the Lebanese company the 0:08:34.280 --> 0:08:37.440 King of kickbacks. It talks about them, you know, always 0:08:37.520 --> 0:08:41.480 taking bribes, offering bribes and credit sweet looks at it. It 0:08:41.520 --> 0:08:43.480 goes right through all their risk committees. They look at 0:08:43.480 --> 0:08:45.960 this report and they eventually say it's going to make 0:08:46.000 --> 0:08:48.600 a lot of money. Let's ignore the report, and they 0:08:48.640 --> 0:08:50.880 continue to do the business. And of course what happens. 0:08:51.320 --> 0:08:53.959 You know, the Lebanese guys offer two hundred million dollars 0:08:53.960 --> 0:08:58.440 in kickbacks to Mozambique officials and also to a credit 0:08:58.480 --> 0:09:01.839 sweet banker. In that case, I'd say it's because they 0:09:01.880 --> 0:09:04.520 see the money and they just go for it. Then 0:09:04.640 --> 0:09:06.720 in the case of Archagots, I think it's slightly different. 0:09:06.760 --> 0:09:08.840 I think they do end up in a position at 0:09:08.880 --> 0:09:12.120 that point where so archae Goos is this big hedge fund, 0:09:12.120 --> 0:09:14.480 and they lend it too much money, and then when 0:09:14.559 --> 0:09:17.640 Archaegas collapses, they're too slow to get out. I think 0:09:17.720 --> 0:09:20.600 in that case it isn't so much that they are 0:09:20.880 --> 0:09:22.880 chasing the money because all of the banks are lending 0:09:22.920 --> 0:09:25.400 to Archagas. It's that their risk functions just aren't working 0:09:25.480 --> 0:09:26.520 very well at that point. 0:09:27.600 --> 0:09:30.440 Someone listening to this he doesn't follow the difference between 0:09:30.440 --> 0:09:32.319 banks and different countries might think, hang on a minute, 0:09:32.400 --> 0:09:35.320 Swiss banks are supposed to be well. Switzerland are supposed 0:09:35.320 --> 0:09:39.280 to be safe, possibly a little boring secret as you 0:09:39.360 --> 0:09:41.679 mentioned as well, So it might be a bit of 0:09:41.720 --> 0:09:45.240 a surprise that actually the hotbed of scandal and excessive 0:09:45.280 --> 0:09:49.280 risk taking was sitting in this over a century year 0:09:49.320 --> 0:09:53.080 old Swiss institution. Is it connected to the secrecy part? 0:09:53.160 --> 0:09:56.000 I mean, why under when you look under the hood 0:09:56.040 --> 0:10:00.000 of this Swiss institution, were they not adequately protecting themselves 0:10:00.120 --> 0:10:00.680 against risk? 0:10:01.040 --> 0:10:03.480 Yeah. So I think there's a unique thing with Swiss 0:10:03.480 --> 0:10:05.960 in that it's half a Swiss bank and half a 0:10:05.960 --> 0:10:09.800 hard charging Wall Street City of London investment bank, and 0:10:10.040 --> 0:10:13.520 that is really unique. And those two things are constantly attention. 0:10:14.000 --> 0:10:18.200 They fight all the time over pay, really kind of 0:10:18.240 --> 0:10:20.679 in public that the Swiss approach to pay as well, 0:10:20.720 --> 0:10:22.559 they get really well paid, but don't talk about it. 0:10:22.720 --> 0:10:25.120 The American approach to payers. We want to talk about 0:10:25.120 --> 0:10:27.240 how well paid we are. And so there's two things 0:10:27.240 --> 0:10:30.280 that are like constantly constantly fighting each other. But I 0:10:30.320 --> 0:10:32.400 think it is really worth looking at the Swiss piece 0:10:32.400 --> 0:10:34.760 in particular. So I think there was an element in 0:10:34.800 --> 0:10:38.400 Switzerland while all of this was unfolding of saying this 0:10:38.559 --> 0:10:40.760 was just the Americans. It was the Americans getting us 0:10:40.800 --> 0:10:43.400 in trouble and that's not true if you look at 0:10:43.400 --> 0:10:45.880 the Nazi stuff, that is nothing to do with the Americans. 0:10:45.920 --> 0:10:48.760 That's purely Swiss. There are a couple of other scans, 0:10:48.760 --> 0:10:51.480 as one with a guy named Patrice Les Goodron who 0:10:52.440 --> 0:10:55.760 is a private banker deals with high net worths from 0:10:56.240 --> 0:10:59.760 Eastern Europe in particular and essentially steals money from a 0:10:59.760 --> 0:11:04.080 lot of very wealthy Eastern Europeans. And that happens in Switzerland, 0:11:04.320 --> 0:11:08.080 and I think part of it is that Swiss Secrecy Act, which, 0:11:08.240 --> 0:11:10.920 if you think about it, right, what does that attract. 0:11:11.520 --> 0:11:14.920 Sometimes it attracts people who legitimately have a concern that 0:11:15.000 --> 0:11:17.520 you know, governments might come after their money on fairly. 0:11:17.840 --> 0:11:21.559 But it is also inevitable that that will attract dictators 0:11:21.600 --> 0:11:25.040 and organize crime and oligarchs and so on who also 0:11:25.080 --> 0:11:26.720 want to hide their money from authorities. 0:11:27.320 --> 0:11:30.520 There was a pretty big turnover of chief executives right 0:11:30.520 --> 0:11:33.560 for I think in about ten years when you look at, 0:11:34.000 --> 0:11:36.920 you know, what was their role in risk taking? And 0:11:36.960 --> 0:11:38.720 again and I heard a lot from the leadership of 0:11:38.720 --> 0:11:40.640 Crety Sweets and saying, well, you know, you have a 0:11:40.679 --> 0:11:43.720 group of rainmakers or a group of traders in London 0:11:43.760 --> 0:11:47.120 and in New York that were not listening to the 0:11:47.200 --> 0:11:49.719 rules for a long time, but you're pushing back against that. 0:11:50.280 --> 0:11:52.880 Yeah, so I think you're right to point to the 0:11:52.920 --> 0:11:56.240 turnover of chief executives. My view is that that's critical 0:11:56.320 --> 0:11:59.240 and the end of sweet. Part of what happens there 0:11:59.360 --> 0:12:03.000 is every new CEO is dealing with crises that often 0:12:03.440 --> 0:12:06.000 evolved under the previous CEO. So they land and the 0:12:06.000 --> 0:12:08.800 first thing that lands on their play is a scandal 0:12:08.800 --> 0:12:11.160 from the last guy. So you can barely get going 0:12:11.200 --> 0:12:13.760 before you're dealing with some multi billion dollar scandal that 0:12:13.840 --> 0:12:16.400 has nothing to do with you, and then inevitably you 0:12:16.480 --> 0:12:18.480 set up a bunch of scandals for the next person 0:12:18.520 --> 0:12:21.520 to pick up. So I think that's really important. None 0:12:21.559 --> 0:12:23.640 of them really get to grips with that. I think 0:12:23.679 --> 0:12:27.680 because they're kind of second tier, both in Switzerland and 0:12:28.520 --> 0:12:31.120 on Wall Street, they're kind of second tier. They're not 0:12:31.200 --> 0:12:33.920 quite the best, and so they're willing to kind of 0:12:33.920 --> 0:12:35.719 turn a blind eye a little bit. They get and 0:12:36.040 --> 0:12:38.080 I think they all get upset. All the CEOs and 0:12:38.160 --> 0:12:42.200 chairmen are upset about the culture of pushing things, but 0:12:42.280 --> 0:12:44.920 they all inevitably accept it because that's the only way 0:12:44.920 --> 0:12:47.640 to generate profits. What happens at the end And make 0:12:47.720 --> 0:12:49.440 this point in my book. You know you said four 0:12:49.480 --> 0:12:51.920 in the last ten years or so, Actually in the 0:12:52.080 --> 0:12:54.800 end they when it comes right to the anacots sweet 0:12:54.800 --> 0:12:57.520 They've got a new CEO, a new chairman, a new 0:12:57.600 --> 0:13:00.520 chief risk officer, and new chief of the investment, a 0:13:00.559 --> 0:13:03.880 new head of communications, and your chief legal counsel. Everybody's 0:13:03.920 --> 0:13:06.160 been there for about six to twelve months, and so 0:13:06.200 --> 0:13:07.840 when they kind of hit with a big crisis right 0:13:07.840 --> 0:13:10.280 at the end, there's really nobody there who's got any 0:13:10.360 --> 0:13:13.240 institutional knowledge of how to deal with it. And I 0:13:13.240 --> 0:13:15.880 think on top of that, the Swiss authorities look at 0:13:15.920 --> 0:13:17.480 them and say, well, what do you guys know, you've 0:13:17.480 --> 0:13:20.000 hardly been here. It's time to close the bank down. 0:13:20.480 --> 0:13:23.280 Can you take us back then to those few days 0:13:23.280 --> 0:13:26.920 there's very dramatic days in twenty twenty three when all 0:13:26.920 --> 0:13:28.360 these things came to a head. So you've got this 0:13:28.440 --> 0:13:33.600 inexperienced team running the shop. You've got losses coming through 0:13:33.640 --> 0:13:37.880 from the scandals that you mentioned. How did it actually 0:13:37.920 --> 0:13:41.600 transpire that this bank effectively vanished in the space of 0:13:41.600 --> 0:13:42.600 a few days. 0:13:42.720 --> 0:13:45.200 So you have to start really a few months before that. 0:13:45.600 --> 0:13:47.880 So a few months before that, if you remember, this 0:13:48.040 --> 0:13:49.600 was kind of a big deal at a time, there 0:13:49.640 --> 0:13:53.480 was a tweet by an Australian journalist who doesn't really 0:13:53.480 --> 0:13:56.360 cover global investment banks or anything like that, and he 0:13:56.440 --> 0:14:00.840 tweeted out words to the effect of credible tells me 0:14:00.960 --> 0:14:03.600 big global bank on the brink, and that was it 0:14:03.600 --> 0:14:06.920 didn't mention from Australia. And he tweets out this thing, 0:14:06.960 --> 0:14:10.400 which seems pretty innocuous on the surface, but for some 0:14:10.480 --> 0:14:12.960 reason people decide that that is Credit Sweet, and I 0:14:12.960 --> 0:14:15.800 think that some reason is because it's had all these scandals. 0:14:16.040 --> 0:14:18.800 What then happens is this kind of escalates on social 0:14:18.880 --> 0:14:21.200 media and you get this kind of crazy scene where, 0:14:21.600 --> 0:14:24.400 especially in Asia, people are tweeting it out with charts 0:14:24.480 --> 0:14:26.840 and things that show that it really is Credit Sweet. 0:14:27.480 --> 0:14:29.320 The tweet gets taken down, by the way, but in 0:14:29.360 --> 0:14:32.040 the meantime, about one hundred billion dollars has been pulled 0:14:32.080 --> 0:14:34.120 out of Credit Sweets in a matter of a few days, 0:14:34.280 --> 0:14:36.640 so the bank is seriously weakened. And at that point, 0:14:36.680 --> 0:14:38.880 so this is a few months before it collapses, they 0:14:38.960 --> 0:14:41.400 really really thought it was going to collapse. In fact, 0:14:41.840 --> 0:14:46.480 the communications team had already written in October twenty twenty two, 0:14:46.880 --> 0:14:48.560 they had written the press release for the end of 0:14:48.600 --> 0:14:51.080 Credit Sweet, because that's how it run is happening on 0:14:51.120 --> 0:14:53.040 the bank gets to run on aut of a global 0:14:53.080 --> 0:14:56.400 digital run is sparked by that tweet exactly. 0:14:56.200 --> 0:14:58.280 But it took a long time for the communications team 0:14:58.280 --> 0:14:59.400 to actually put anything out. 0:14:59.680 --> 0:15:01.840 Yeah, it was almost silent. I think this was partly 0:15:01.880 --> 0:15:04.240 the new CEO and new chairman, who were sort of 0:15:04.280 --> 0:15:08.000 rabbits in the headlights, didn't know what to do. Fortunately 0:15:08.000 --> 0:15:09.320 for them at the time, or at least they think 0:15:09.320 --> 0:15:11.840 it's fortunate they managed to kind of slow this down. 0:15:12.440 --> 0:15:14.840 Panic kind of subsides for a little while, and then 0:15:14.880 --> 0:15:18.760 you get into twenty twenty three and pretty fragile. The 0:15:18.800 --> 0:15:21.080 state of the bank's quite fragile, and there's a bunch 0:15:21.120 --> 0:15:24.720 of other little scandals kind of erupting around it. And 0:15:24.760 --> 0:15:27.360 then you get the Silken Valley Bank thing in the US, 0:15:27.440 --> 0:15:30.600 which kind of creates more fragility in the whole system. 0:15:30.920 --> 0:15:33.400 And I think it's hard to recall now, but at 0:15:33.440 --> 0:15:35.360 that time, it really felt like there was a potential 0:15:35.360 --> 0:15:37.560 for another global financial crisis. You know, there were two 0:15:37.600 --> 0:15:40.320 or three banks teetering in the US and In fact, 0:15:40.320 --> 0:15:43.560 what you get is kind of yelling and Karen Kellisuta, 0:15:43.560 --> 0:15:47.200 who's the Swiss finance minister, and you know, finance ministers 0:15:47.240 --> 0:15:50.080 around the world kind of communicating to say, we need 0:15:50.120 --> 0:15:54.360 to stop this right now. And so Cali Suita in Switzerland. 0:15:54.600 --> 0:15:56.880 She was also new right she'd only got into her 0:15:56.880 --> 0:15:59.960 spot in the January I think. She looks around the room, 0:16:00.000 --> 0:16:02.840 woman says, how am I going to stop sweet's blowing 0:16:02.920 --> 0:16:06.920 up Switzerland and potentially the world's financial system. She looks 0:16:06.920 --> 0:16:09.040 at the CEO and chairman says, do I trust these 0:16:09.040 --> 0:16:09.840 guys to fix it? 0:16:10.320 --> 0:16:12.400 Maybe not, but don't get it so I remember, you know, 0:16:12.400 --> 0:16:14.160 And it took about two months to actually convince the 0:16:14.240 --> 0:16:17.240 leadership to come on after that October twenty twenty three 0:16:17.640 --> 0:16:20.120 because outflows were, you know, pouring out. And then we 0:16:20.160 --> 0:16:23.720 finally get to the chairman in December. He comes to London, 0:16:24.240 --> 0:16:26.360 speaks to us for fifteen minutes and he says, look, 0:16:26.400 --> 0:16:28.760 things are slowly getting better. Yeah, so they have a 0:16:28.760 --> 0:16:31.000 bit of a respite. So at that point, what's what's 0:16:31.040 --> 0:16:32.560 the concern? Is it liquidity? 0:16:33.200 --> 0:16:34.600 Is the run continuing? 0:16:34.680 --> 0:16:37.760 Yes, it's outflows. It's basically people are saying we're getting out, 0:16:37.760 --> 0:16:38.760 we're getting out, we're getting well. 0:16:38.840 --> 0:16:41.400 That's doing is you know, that means their profitability is 0:16:41.440 --> 0:16:43.880 getting worse and worse. Right, if the money is coming out, 0:16:43.920 --> 0:16:47.760 that's fees disappearing. So the profitability problem they had before 0:16:47.920 --> 0:16:49.440 is now significantly worse. 0:16:49.560 --> 0:16:53.000 But there's no solvency concerns and there's no liquidity concern 0:16:53.040 --> 0:16:56.240 And I think that's important because then there was something 0:16:56.280 --> 0:16:58.840 happening three months afterwards where people were in a panic, 0:16:58.920 --> 0:17:00.040 but just wasn't there on the. 0:17:00.520 --> 0:17:02.800 Yeah, the problem it had and the reason that my 0:17:02.840 --> 0:17:04.920 book is focused on all the scandals is the problem 0:17:05.000 --> 0:17:08.119 it had was its reputation was ruined. It's did people 0:17:08.119 --> 0:17:10.280 trust the bank? And the problem with the bank is, 0:17:10.640 --> 0:17:13.000 you know, if people don't trust it, it's finished. If 0:17:13.040 --> 0:17:15.040 nobody wants to put their money there, you don't have 0:17:15.080 --> 0:17:18.080 a bank anymore. And so that really is what happens 0:17:18.119 --> 0:17:20.440 I think over that few months. I mean they also 0:17:20.560 --> 0:17:23.200 mess up all the time. So the chairman said at 0:17:23.200 --> 0:17:26.960 that time, around that time, we've seen money flowing back 0:17:27.000 --> 0:17:30.199 into the bank, which wasn't true. That was a lot 0:17:30.280 --> 0:17:32.680 well he said he made a mistake or he misspoke 0:17:32.680 --> 0:17:35.600 as something he was under real serious pressure whether he 0:17:35.800 --> 0:17:39.560 said something that was absolutely wrong and illegal. Days before 0:17:39.560 --> 0:17:42.840 they collapse, actually the SEC told them they couldn't publish 0:17:42.880 --> 0:17:46.320 their annual annual report because it had errors in it, 0:17:46.640 --> 0:17:49.280 which in and of itself, had they not collapsed, would 0:17:49.280 --> 0:17:50.720 have been another enormous. 0:17:50.400 --> 0:17:52.720 Scandal to what was the final The final straw. 0:17:52.840 --> 0:17:54.919 The final straw, I think really was what was happening 0:17:54.960 --> 0:17:57.240 in the US, and that there was a sense that 0:17:57.920 --> 0:18:00.960 this cannot go any further. I think this swisk government, 0:18:01.200 --> 0:18:04.199 Swiss authorities were worried that it was starting to affect 0:18:04.240 --> 0:18:07.199 Switzerland and maybe it would affect ubs. Two, that there's so 0:18:07.320 --> 0:18:09.960 much money coming out of credits Swiss that it was 0:18:10.000 --> 0:18:12.159 starting to damage the frank and it could start to 0:18:12.200 --> 0:18:12.520 do so. 0:18:12.560 --> 0:18:15.840 It was moving the Swiss currency. It was being damaged 0:18:15.840 --> 0:18:18.119 by the amount of money being pulled out of the bank. 0:18:18.320 --> 0:18:21.200 In the previous October with the Twitter thing, that'd mostly 0:18:21.240 --> 0:18:24.000 be money in Asia and they could kind of handle it. 0:18:24.160 --> 0:18:26.160 I mean, it was a disaster, but it was much 0:18:26.240 --> 0:18:30.240 worse when the following February March, Swiss people started to 0:18:30.240 --> 0:18:32.520 put their money out and move it oversea, move it 0:18:32.520 --> 0:18:35.240 outside of Switzerland, and so that gave them a real problem. 0:18:35.600 --> 0:18:37.280