Credit Suisse claims the U.S. banking crisis brought it down. But is this true?

Swiss regulators placed a strong focus on the role of U.S. regional banks catastrophes in driving the troubled Swiss institution to the verge of collapse after Credit Suisse's "emergency rescue" by rival UBS.

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The recent decline in the share price of Credit Suisse was sparked by the failure of Silicon Valley Bank in the United States, but it was exacerbated when the 167-year-old Swiss organization disclosed that it had discovered "serious deficiencies" in its financial reporting practices.

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The ultimate blow came with the Saudi National Bank's confirmation that it could no longer fund Credit Suisse, which prompted the Swiss National Bank to announce a loan of up to 50 billion Swiss francs ($54.2 billion). By that time, shares of Credit Suisse had fallen by about 98% from their all-time high.

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The emergency sale of the bank to UBS for 3 billion Swiss francs so over weekend was arranged by Swiss regulators after the loan intervention eventually failed to win back investor trust.

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"The most negative time was when we were hit by the most recent developments that came from US banks. We were able to overcome the severe market uncertainty once, as last year, but not this time, said Credit Suisse Chairman Axel Lehmann at a news conference on Sunday evening.

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"Credit Suisse cannot continue in its current shape due to the rapidly increasing lack of confidence and the intensification over the past few days. We are pleased to have discovered a solution that, in my opinion, would provide clients, employees, and finance

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Thomas Jordan, the SNB's chairman, also decried the "U.S. the "financial crisis" for hastening a "loss of confidence in Switzerland," which had an impact on the liquidity of Credit Suisse.

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But, the spiraling share price of Credit Suisse and the growing asset withdrawals were already in motion before Silicon Valley Bank failed earlier this month. FINMA, the Swiss regulator, has been criticized for allowing the issue to get worse as the bank was beset by controversy and losses for years.

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Former UK official Mark Yallop is the current head of the Financial Markets Standards Board in the UK. The CEO of UBS told Trade Algo said he agreed with the general conclusion that the failure of Credit Suisse was "idiosyncratic."

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It's unfortunate that the issues that occurred at certain smaller U.S. banks during the past two or three weeks coincided with this Credit Suisse incident, but the two are entirely unrelated, he added.

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The troubles at Credit Suisse are related to a long history of management changes at the company's top, a shifting strategy, as well as a number of challenges with operational risk, control, and compliance.

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The announcement from major investor the Saudi National Bank that it was unable to provide any more funding to Credit Suisse was the last straw that caused the share price to drop to an all-time low prior to a 50 billion line of credit from the SNB last Thursday, that also ultimately failed to reinstate market confidence in the bank.

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The actions we witnessed over the weekend were essentially unavoidable at that point, according to Yallop. "One never knows with a bank failures when the moment of crisis would come, but that was the time when investors finally said enough is enough and threw in the towel," he continued.

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It also raises the question as to how much of the blame for Credit Suisse's demise can really be attributed to the SVB collapse given that quick action from the Federal Reserve and the Treasury Department is largely credited with successfully containing any potential contagion to the U.S. financial system.

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The banking and regulatory regime in Switzerland, in contrast, has faced criticism.

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According to Steven Glass, general manager and analyst at Pella Funds Management, this week's decline in the share price of Credit Suisse was long overdue, and the bank's exposure to the collapse of Greensill Capital in 2021 actually crystallized customers' loss of faith.

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"The issue with Greensill, it was actually a huge issue," Glass said on Trade Algo. "That fund was promoted to a whole lot of [Credit Suisse's] elevated individual customers as a very safe financing, as a way to just get yield in a low-yield globe, and when that blew it up, a whole huge amount of one‘s franchise lost the money and they pretty much lost trust in Credit Suisse."

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Banks like Credit Suisse took on more risk in an effort to maintain their profitability and stop high-net-worth clients from moving their money elsewhere, according to Glass, as a result of new regulations enacted in the wake of 9/11 forcing Swiss banks to abandon the customer secrecy that had long been a pillar of their business model.

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According to him, Credit Suisse "shot itself in the foot" in this situation by losing the trust of its inspire confidence clients due to Greensill and a host of other problems over the years.

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In spite of the fact that this happened concurrently with SVB and Signature Bank, Glass said, "We believe that many of those banks truly had an issue with their business model, more so than there being an overt financial crisis.

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This was also said by Octavio Marenzi, CEO of Opimas, who stated on Trade Algo that Switzerland's "well created, honed reputation" for financial stability "lay in tatters" as a result of the Credit Suisse scandal.