Why exactly should the planned participation of the Saudi National Bank in Credit Suisse be disapproved? And what would that imply for Switzerland as a business location? The critics make it too easy for themselves.
Credit Suisse made a late but decisive decision to reform its business strategy.
The compliance specialist Monika Roth recently complained in the NZZ that one should ask oneself why the Saudis wanted to invest in Credit Suisse. Asking the right questions is always an important challenge. Another is to keep track of which questions are relevant to which level.
Welcome risk-taking
Credit Suisse, which got into trouble as a result of a series of mistakes, decided late but nevertheless to radically reform its business strategy. The focus on asset management and the separation of large parts of the investment bank should make the financial institution more profitable, more secure and more reliable. That is to be welcomed.
Because the conversion will initially cost a lot and there are no doubts about its stability, Credit Suisse needs more equity. After the previous shareholders had already had to accept significant losses in the past few years, their willingness to take risks and invest seems to be limited.
The Saudi National Bank (SNB), on the other hand, values the upside potential of an investment at the current price and likely the benefits of closer cooperation. She wants to invest up to 1.5 billion Swiss francs. That’s money that CS needs and that – if the restructuring doesn’t succeed – the Saudis will lose. In return, they receive a minority share in CS of less than 10 percent, which does not give them a blocking minority.
Whether this makes sense for Credit Suisse is up to its shareholders and the management of CS to decide. For Switzerland, the only question is whether it should be possible to do business with Saudi Arabia at all and whether Saudi Arabia should be allowed to invest in Swiss companies.
Saudi Arabia is not alone
It is undisputed that the nefarious way in which the Saudi crown prince and economic reformer governs and treats his people is anything but in line with our values. But does that mean we don’t want to buy Saudi oil anymore? Do we disapprove of the fact that the state-controlled Saudi petrochemicals group Sabic owns 31.5 percent of Clariant, which probably played a major role in securing the Basel-based specialty chemicals company’s independence?
And what about Qatar, which hit the headlines after the soccer World Cup and already holds 5 percent of CS? Didn’t we just want his natural gas? And what about China?
Switzerland is successful because it is particularly open to an internationally oriented economy. It enforces its rules and values in Germany, including in the many corporations that are mostly foreign-controlled. Hopefully this will allow some of our business culture to be indirectly exported without the presumptuous claim of being able to impose our ideas on the rest of the world.
Trade and investment policy should normally focus on trade and investment issues, human rights policy on human rights. In retail, it has been proven that even one-sided openness pays off. In principle, this should also apply to investments, although one could insist more strongly on reciprocity when it comes to market access.
One may take offense at the fact that large investments from the Middle East or China are giving state-controlled structures influence in market-economy companies. Some see an investment control – which Switzerland has not known so far – as a tried and tested remedy. But at what threshold should this take effect in a liberal market economy and how should the line be drawn between “good” and “bad” investors? The danger of falling into bureaucratic protectionism without improving anything substantial would be great.
Even state investment controls would almost certainly not prevent the acquisition of less than 10 percent of the share capital that the Saudis plan to hold in CS. The criticism of it is one thing above all: shockingly hypocritical.