The Credit Suisse Crisis and International Law II

The Credit Suisse Crisis and International Law II

In the wake of the Credit Suisse crisis, which saw the bank facing billions of dollars in losses due to risky investments in hedge funds, the issue of accountability and responsibility has become more prominent than ever. This article will delve deeper into the legal implications of the Credit Suisse crisis, particularly in relation to international law, and explore the steps that must be taken to ensure that such a crisis does not happen again.

The Credit Suisse Crisis: A Recap

The Credit Suisse crisis, which began in 2018, was the result of the bank’s investment in Greensill Capital, a British supply chain finance company. The investment was made through funds managed by Credit Suisse, which had invested heavily in Greensill. When Greensill collapsed in early 2021, Credit Suisse was left with billions of dollars in losses.

Legal Implications of the Credit Suisse Crisis

The Credit Suisse crisis has raised several legal questions, particularly with regard to international law. For example, it has highlighted the importance of due diligence and risk management when investing in foreign companies or funds. Credit Suisse’s investment in Greensill was particularly risky due to the fact that Greensill was heavily involved in financing commodities in emerging markets, which are notoriously difficult to regulate.

Furthermore, the Credit Suisse crisis has also brought into question the effectiveness of international regulatory frameworks, particularly in relation to hedge funds and other alternative investment vehicles. Hedge funds, which are not subject to the same regulatory oversight as traditional banks, can be particularly risky for investors, as they often invest in complex financial instruments and use leverage to amplify returns.

Steps to Ensure Accountability and Responsibility

To prevent similar crises from occurring in the future, it is important that steps are taken to ensure accountability and responsibility. This includes holding financial institutions accountable for their actions, particularly when they engage in risky investments that could put their clients’ assets at risk. It also means strengthening international regulatory frameworks to ensure that hedge funds and other alternative investment vehicles are subject to appropriate oversight and transparency requirements.

In addition, it is important to promote greater awareness and education among investors and the general public about the risks and benefits of different types of investments. This can help to prevent uninformed investments in risky financial instruments, which can have devastating consequences for investors and the wider economy.

Conclusion

The Credit Suisse crisis has highlighted the importance of accountability and responsibility in the financial sector, particularly when it comes to international investments and regulatory frameworks. It is crucial that steps are taken to ensure that financial institutions are held accountable for their actions, and that international regulatory frameworks are strengthened to prevent similar crises from occurring in the future. By promoting greater awareness and education about financial risks and benefits, we can help to create a more stable and sustainable financial system for all.