Late last week, in “We’re Scaring Ourselves Into Bank Runs Now,” I suggested Credit Suisse would still be a standalone entity were it not for what, in my opinion, was an ill-conceived, on-air interview with Ammar Al Khudairy, chairman of Saudi National Bank, Credit Suisse’s largest shareholder.
My contention was (and still is) that Credit Suisse’s rapid descent into oblivion this month was the direct result of a poorly-worded question and, just as importantly, Al Khudairy’s failure to identify it as such in real time.
“I’m wondering if you’d be open to assisting further if there was another call for additional liquidity from Credit Suisse,” the anchor asked, on March 15. I suggested the question was probably better posed as follows: “Would Saudi National Bank be open to taking a larger stake?” Using the words “assisting” and “liquidity” seemed to intimate that something was wrong.
To be sure, something was wrong. But not something new. Something’s been wrong at Credit Suisse for a long, long time, and indeed, the Saudis’ stake was a product of the bank’s efforts to right the ship. As far as anyone’s aware, though, the only new problem Credit Suisse had on March 15 was a burgeoning crisis of confidence in banks everywhere due to the failure of three regional lenders in the US. There was no direct connection to Credit Suisse (besides the sentiment channel) and no reason to believe SVB’s failure necessitated an emergency call for a liquidity injection from Riyadh.
If the anchor’s question was bad, Al Khudairy’s response was worse: “Absolutely not.” 24 hours later, while speaking to a separate media outlet, Al Khudairy said, “I don’t know where the word ‘assistance’ came from, there has been no discussion whatsoever since October.” (Credit Suisse unveiled their restructuring plan in late October. Part of the overhaul entailed the Saudis taking a large stake in the bank.)
By then, it was too late. Al Khudairy should’ve corrected the original anchor immediately.
Fast forward to Monday, and Al Khudairy resigned citing “personal reasons.” I suppose I don’t have to say this, but it wasn’t for “personal reasons.” Al Khudairy inadvertently triggered the collapse of Credit Suisse, thereby costing a key Saudi institution a lot of money. Mohammed Bin Salman probably wasn’t enamored with that, not because of the money (the amount in question is a pittance to the Crown Prince) but rather because it was embarrassing.
So, Al Khudairy — a veteran of the Saudi financial scene, and former chairman of both Morgan Stanley and Goldman Sachs in the Kingdom — fell on his sword. Figuratively.
Don’t feel too bad for him, though. He’s still rich, and it could’ve been worse. More often than not, embarrassing MBS results in a sword falling on you. Literally.
Mario Draghi taught us that the right answer is always, “Whatever it takes…”.