The full weight of the Basel Committee’s prudential banking rules have not prevented Credit Suisse from slipping up, again and again,” the Financial Times editorial board complained.1 Its bottom line had fallen victim to “systematic failures in risk management.” On March 19th, Swiss regulators brokered a sale of the beleaguered firm to UBS in a rescue deal.2 “So much for 13 years of banking regulation,” the editorial board of the Wall Street Journal quipped.3 “This weekend’s rescue is a warning that two weeks into the current banking panic the post-2008 rule book already has failed.”
What should be evident in the Credit Suisse saga is that capital woes were not what triggered the loss of confidence in the firm that spelled its undoing. Rather, the firm’s capital woes reflected a loss in confidence that had been triggered by repeated misconduct scandals and failures in non-financial risk management.4 Lurching from one crisis after another, Credit Suisse “managed to scandalise itself out of existence,” as one Financial Times journalist put it in a particularly memorable turn of phrase.5
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