Early on in the coronavirus crisis, Credit Suisse’s senior management was instrumental in the design and implementation of Switzerland’s scheme of government-guaranteed loans. The scheme was so successful that other countries later moved to bring their programmes in line with it.
Switzerland was already under fewer illusions about the health implications of the disease than countries further north because of its border with northern Italy.
In terms of the economic impact, André Helfenstein, chief executive of Credit Suisse’s Swiss universal bank, says the bank was particularly aware of what was coming because of its position in the larger and more export-orientated SME segment, which felt the pressures first.
“We saw mid-market companies in Switzerland had a lot of questions,” says Helfenstein. “The core of the idea was that the banking sector was well-placed to distribute bridging loans to small and medium-sized businesses worst hit by the lockdowns, given the existing client relationships between SMEs and their banks.”
Thomas Gottstein, group chief executive, first discussed the idea of a guaranteed loans programme with the authorities and other banks in mid March. Crucially, it was only a few days later that the government and bank executives, including Helfenstein, agreed that banks’ prudential responsibilities were such that even a guarantee of 85% would not be enough for the smallest companies.
It took other states, such as Germany and the UK, several weeks to reach that same conclusion.
On March 25, the Swiss scheme was launched, with a 100% guarantee from the outset, interest-free for loans of up to SFr500,000 ($528,000). The government also guaranteed 85% of loans between SFr500,000 and SFr20 million, at an interest rate of 0.5%.
The 100% guarantee helped banks do away with risk procedures that they would usually need, especially during conditions of stress. As a result, loans could be granted so rapidly that at Credit Suisse the average application only took between 20 and 30 minutes, allowing it to deploy SFr1.4 billion in loans in the first four days alone.