The liquidity crisis at Zurich-based corporate bank Credit Suisse was many years in the making, a former employee has said.
Share prices in the 167-year-old institution tumbled on Monday in the wake of the collapse of three US specialist industry banks. They only recovered once the mostly-state owned Swiss National Bank offered a 50-billion-franc ($54 billion) credit lifeline.
David Tawil, a former Credit Suisse employee, told Sputnik that the crisis at the global banking giant was huge compared to the collapse of the regional Silicon Valley and Signature banks in the US and it had "been a really long time coming."
"Even when I was there post the financial crisis, the bank really started to go down a very mismanaged path," Tawil revealed.
He added that the bank had changed leadership often, with a mix of Swiss and US executives coming and going, and had "lost its way for a very long time now."
"They had leaders from other banks come in and they really never had a game plan in terms of how to fix the bank," he continued. "And they saw a lot of bad activities happening from inside the bank. They lost a bunch of money on a couple of trades that went poorly. And then there were criminal allegations and fraud allegations against various people in the bank in different regions."
The fund manager said the national bank's bailout of Credit Suisse "gives them some short term flexibility, essentially borrowings to allow to the extent that they need to satisfy depositors that want to go ahead and take their money out," but was ultimately a "temporary Band-Aid."
He warned that the Credit Suisse crisis was not just a one-off case and was not the result of the bank holding "toxic assets" like those bailed out during the 2008 'Credit Crunch'.
"This has been a slow moving train wreck," Tawil stressed. "This is about fear of depositors of being the last one out the door. The first guy gets their money in full. If you're the last depositor out the door, it's likely that you're not going to get your money."
The former Credit Suisse employee predicted the banking giant would soon be "wound down."
"That's what we will probably see over the next bunch of weeks, unless someone wants to step in and give the bank more permanent capitalization," Tawil said. He pointed to an announcement this week by the the bank's biggest single investor, a Saudi sovereign fund, that "they are no longer interested in investing further in Credit Suisse."