Credit Suisse Essay ⋆ Business Essay Examples ⋆ EssayEmpire

The Credit Suisse Group is a Zurich-based financial services corporation offering investment banking, private banking, and asset management through its three divisions. The Credit Suisse Shared Services division provides services in support of the other three divisions, principally legal and IT service.

Alfred Escher (1819–82) founded the company, then called Schweizerische Kreditanstalt, in 1856. An adept politician from Zurich, Escher had made a nationwide name for himself with his support of railways as the solution to Switzerland’s malaise following the brief civil war of the 1840s, a solution that would end the country’s economic and geographic isolation. In particular, Escher was instrumental in keeping the railroads in the private sector—benefiting Zurich, since state-supported railroads would centralize the industry and its earnings in Bern, the capital of the new federal government (established in 1848). While continuing his political service, Escher also acted as the Managing Director of the Northeastern Railway Company, and founded the Kreditanstalt to finance transalpine railway lines. He helped develop Swiss Life, now Switzerland’s largest insurance company, the following year.

Three million francs of Kreditanstalt stock were issued, valued at over 200 million francs within days. The Swiss Confederation, at risk of falling behind western Europe and its Industrial Revolution, was hungry for industrialization and the railways helped make that possible while the Kreditanstalt helped finance it—and helped Zurich become and remain Switzerland’s financial center. As Switzerland industrialized, it entered—until World War I—a golden age that helped it become the banking capital of the world. The first foreign office of Credit Suisse was opened in 1870 (in New York City), and by the end of the 19th century the company had become the principal player in the Swiss underwriting business. Branch offices outside of Zurich began opening in 1905 (the first in Basel), and its underwriting business expanded overseas.

The impact of the Great Depression increased tensions and nationalist sentiment across Europe, and Credit Suisse looked overseas for safer sources of capital. The Swiss American Corporation was founded in 1939 in New York City, as a subsidiary of Credit Suisse’s underwriting business and investment consultancy. Years later, it would be discovered that during the war years, Credit Suisse was one of several banks guilty of improper dealings with Nazi Germany, and mishandling of the “dormant accounts issue” (accounts opened before the end of the war by account holders who became victims of the Holocaust). Like the other banks, Credit Suisse eventually settled by paying money into a pool for reparations as well as to establish a humanitarian fund. In 1964 Credit Suisse was granted a license as a full-service bank in the United States, and in 1982 the bank became the first Swiss bank with a listing on the New York Stock Exchange (via its subsidiary Swiss American Securities).

The American bank First Boston was taken over by Credit Suisse in 1990, becoming Credit Suisse First Boston—now the bank’s investment banking division. The acquisition came in fits and starts. Credit Suisse First Boston had been the name of a joint CS/ FB venture in 1978, and unhappiness with the terms of the venture along with an unsuccessful stretch of a few years led to the departure of several CSFB executives, some of them leaving for Merrill Lynch.

Credit Suisse’s acquisition of First Boston, folding it into CSFB, was part of its response to the change in investment banking in the 80s as Goldman Sachs and Salomon Brothers began to compete with them in the Eurobond market, along with the perception that CSFB and Credit Suisse were in competition with one another for certain services. The 1987 stock market crash and mid-1980s allegations that the bank participated in laundering eastern European drug money had hit Credit Suisse hard, while First Boston suffered from bad loans made for mergers and acquisitions. The acquisition and restructuring was meant to strengthen and redefine both companies.

The 1990s saw more acquisitions and alliances, and the array of banks and services were reorganized in 2002 as the Credit Suisse Group. Several restructurings followed in rapid succession as the company maneuvered to recover from the record losses it had posted in 2002. The current form of the bank, with its three main divisions and shared services division, originated in 2006, in commemoration of the original bank’s 150th anniversary. Credit Suisse First Boston provides debt and equity underwriting, securities services, and mergers and acquisitions management. The group is the second largest financial services firm in Switzerland, behind UBS, and operates in 60 countries, with over 200 retail branches in its homeland.

Bibliography:

Edmund Andrews, “When the SureFooted Stumble: Swiss Banks Stagger After Several Investing Missteps,” New York Times (October 23, 1998);
Paul Beckett, “Credit Suisse and UBS Agree to Open 1 Million Holocaust-Era Accounts,” Wall Street Journal (May 4, 2000);
Dieter Fahrni, An Outline History of Switzerland: From The Origins To The Present Day (Pro Helvetia, 2003);
David Fairlamb, “On the Edge: Will a Radical New Strategy Save the Day for Credit Suisse’s CEO?,” BusinessWeek (July 15, 2002);
Joseph Jung, From Schweizerische Kreditanstalt to Credit Suisse Group: The History of a Bank, trans. by James Knight (Neue Zürcher Zeitung, 2000);
Ian Rodger, “The Enfant Terrible of Swiss Banking,” Financial Times (January 9, 1993).

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