It Wasn’t Just Credit Suisse. Switzerland Itself Needed Rescuing. Letting Credit Suisse fail would have meant shattering Switzerland’s reputation as…" title="It Wasn’t Just Credit Suisse. Switzerland Itself Needed Rescuing. Letting Credit Suisse fail would have meant shattering Switzerland’s reputation as…" />

an international financial hub. As one of the world’s wealthiest and most stable countries, Switzerland has built its economy on a foundation of banking and finance, drawing investors and clients from around the world. The country’s citizens enjoy a high standard of living, but they do so, in part, because of the income generated by the financial sector.

In the wake of the financial crisis that began in 2008, however, Switzerland’s reputation took a hit. Though the country’s banks remained relatively stable during the crisis itself, they were revealed to have been involved in a number of activities that had led to instability in the global financial system. Swiss banks had aided and abetted tax evasion by wealthy clients, and had facilitated money laundering by criminal organizations. For a country that prided itself on neutrality and secrecy, the damage to its reputation was severe.

Against this backdrop, the 2021 meltdown of Credit Suisse was a worrying development. The bank had been one of Switzerland’s most prestigious institutions, with a stellar reputation for asset management and wealth management. Its collapse threatened to undermine confidence in the country’s entire financial sector, and would have set off a chain reaction of economic pain that would have been felt throughout the country.

Indeed, the Swiss financial sector is vital to the national economy: it generates around 10% of the country’s gross domestic product, and employs more than 200,000 people. If Credit Suisse had failed, it would have set off a wave of job losses, bankruptcies, and lost tax revenue that would have reverberated through the country for years to come.

The Swiss government, therefore, had little choice but to step in and rescue the bank. It provided Credit Suisse with a capital injection of 1.35 billion Swiss francs (around $1.5 billion), and put pressure on the bank’s management to take action to address its problems. The government also signaled that it would not tolerate similar meltdowns at other banks, and made clear that it would take whatever steps were necessary to protect the country’s financial stability.

The rescue of Credit Suisse was a necessary move, but it was also a reminder of how fragile Switzerland’s economy really is. The country has come to rely heavily on its financial sector, and as a result, it is vulnerable to shocks and crises in that sector. For years, Swiss officials have talked about the need to diversify the economy and reduce reliance on finance, but progress has been slow.

The lesson of Credit Suisse, therefore, is not just that banks need to be better managed, but that Switzerland itself needs to be better prepared for future crises. The country cannot afford to rest on its laurels and assume that its reputation as a financial hub will protect it from economic shocks. Instead, it needs to undertake serious efforts to diversify the economy, improve social safety nets, and build resilience against future crises. If it fails to do so, events like the Credit Suisse meltdown will become more and more common, and Switzerland’s reputation as a stable and prosperous country will be seriously threatened.