If G-SIBs were a gentlemen’s club rather than a category invented by the Basel-based Financial Stability Board, Credit Suisse would have been kicked down the front steps months ago. G-SIBs are the 30 ‘global systemically important banks’ and even within that list, Credit Suisse counted among those with the lowest ‘required levels of addition capital buffers’: in short, regulators considered it rock-solid.

But that was a judgment on its end-2021 balance sheet, not its management. Credit Suisse has been so badly run for so long – so riven by tension between the dull Swiss wealth business it ought to have been and the global player it imagined itself to be – that some of us wondered how it survived. ‘Pour encourager les autres,’ I wrote 18 months ago, wouldn’t it be better ‘to move the depositors to a safer bank and close the repeat offender down’?

That’s pretty much what happened in the forced merger with UBS last weekend. It surprised no one in the know and was not provoked, as Silicon Valley Bank’s fall was, by rising interest rates. Irrational market fear underpinned both events but in Credit Suisse’s case, rational analysis said the bank was a basket-case. The last straw was a $5.5 billion loss, blamed internally on ‘fundamental failure of management and controls’, in derivatives dealings with Archegos Capital Management in New York which could only ever have delivered paltry returns to the bank: high-risk-low-margin business catastrophically handled.

Credit Suisse’s fate should have been decisively resolved by the Swiss authorities and the bank’s own board last autumn, when its shares were in freefall and client funds were fleeing. Allowing it to linger has harmed confidence in the entire European banking sector. But ejection from the G-SIB club might not have been enough: in the old-fashioned way, Credit Suisse should have done the decent thing. I’m reminded of an immortal line from a clubman in a Dorothy L. Sayers novel: ‘I say, you fellows… here’s another unpleasantness. Penberthy’s  shot himself in the library. People ought to have more consideration for the members.’

None shall fail

Whatever happened to the avoidance of moral hazard? The bailout of the global banking system in 2008 was, to quote former Bank of England governor Mervyn King, ‘possibly the biggest moral hazard in history’. It encouraged banks ‘to take risks that result in large dividend and remuneration payouts when things go well, and losses for taxpayers when they don’t’. King was particularly concerned about banks that are ‘too big to fail’ – a group that turns out to include not only the ‘systemically important’ but also smaller institutions such as Silicon Valley Bank, whose uninsured depositors were awarded instant federal protection.

Credit Suisse bondholders and shareholders bewail their losses; its executives rightly fear for their jobs; but depositors everywhere now assume themselves to be fully protected. And for the avoidance of panic, you may think that’s quite right. But there used to be an element of deposit risk that encouraged better banking. Now there’s none.

And the irony of the Silicon Valley Bank rescue is that its depositors included venture capitalists who ardently adhere to the libertarian view that government should stand aside while bad businesses fail and smart ones triumph. VCs hastened SVB’s demise by stampeding to take their cash out, but then shamelessly called for a taxpayer guarantee of its remaining deposits. One such was David Sacks – an investor in PayPal, Facebook, Uber and many more – who tweeted: ‘Even libertarians understand the need for government to prevent bank runs.’

Oh really? In effect all banks are now too important to fail, for fear of contagion and social-media disorder. So bad banks are insured against taking stupid risks because if better banks can’t be strong-armed into taking them over, taxpayers will pick up the bill. At least depositors sleep easy for the time being; but it’s a formula for trouble ahead.

Partners no more?

How sad that John Lewis Partnership, the store group that owns Waitrose supermarkets, is contemplating a radical dilution of the employee-ownership structure bequeathed in 1929 by its philanthropic proprietor John Spedan Lewis. Reports say chairman Dame Sharon White is seeking a private-equity injection of up to £2 billion because, according to a former insider, ‘they’ve basically run out of money’ – and if this is the way to save a business admired by its peers and loved by its customers, so be it. The JLP model has clearly reached its scalable limit and has rarely been replicated elsewhere. But it has stood for a century as a beacon of gentler capitalism – and if this is the beginning of the end, we should all regret its passing.

Stamina counts

In a week of gloom, one small headline made me smile: ‘Petrol pumps out profits for Ronson’s forecourts.’ That’s Gerald Ronson, 83, the real-estate tycoon who was jailed for his part in the 1986 Guinness scandal and lost the best part of £1 billion in the early 1990s property crash, then fought his way back to develop landmark City towers and earn a CBE for philanthropy. Throughout that rollercoaster career he has also owned a chain of petrol stations – founded in 1966, now numbering 264 outlets – which in the year to September, thanks to sky-high fuel prices, made pre-tax profits of £97.5 million.

Before and after Guinness, bankers always regarded Ronson as a man they could do business with. When my father was a senior manager of Barclays, he was driven round north London in a Rolls-Royce one Saturday by the young Ronson, who wanted to show off his pioneering self-service forecourts with convenience stores – and no doubt ask for a bigger overdraft. That was more than half a century ago: stamina and resilience count for so much in business, whatever the shocks and setbacks.