Business
Several problems and controversies plague Credit Suisse.
ZURICH: The shares of Credit Suisse, the world’s largest bank, fell significantly as the company remains embroiled in a spate of scandals and is seen as the “weakest link” in the Swiss banking sector.
Long before the SVB Fiasco, investors’ trust in Credit Suisse was waning.
The problems plaguing Switzerland’s second-largest bank are summarised as follows:
Bankruptcy of Greensill
The issues started when Greensill, a British financial institution specializing in short-term. Through a convoluted and opaque business model, corporate loans went under in 2021.
Greensill’s demise impacted many businesses, but none more so than Credit Suisse, which had a sizable investment in the company.
Once Greensill declared bankruptcy in March 2021. Credit Suisse liquidated four linked funds with a combined $10 billion investment.
The bank “seriously infringed its supervisory requirements” in this case, according to Swiss financial regulator Finma, which imposed “remedial measures.
Archegos
Four weeks after the failure of Greensill, the fall of US hedge fund Archegos. Which cost the bank more than $5 billion, shook Credit Suisse.
Loans to Mozambique
The bank was penalized $475 million by US and British authorities in October 2021 after becoming involved in a corruption scandal involving loans to state-owned businesses in Mozambique.
Between 2013 and 2016, the loans were intended to fund fishing and shipbuilding. And maritime surveillance initiatives but were partially used to pay bribes.
The country, thrown into a severe financial crisis, owed the bank $200 million, which the bank agreed to cancel with the British authorities.
Covid rule violation
Antonio Horta-Osorio, a former leader of the Lloyds Banking Group. Was appointed chairman of Credit Suisse in April 2021 and pledged to improve risk management throughout the company.
Yet less than nine months later, he announced his resignation once it became clear he had broken the Covid quarantine restrictions of Switzerland.
Schweizer Secrets
According to a media exposé titled “Suisse Secrets,” released in February 2022, the bank stored billions of dollars in illicit funds for years.
Leaked data on more than 18,000 bank accounts dating back to the 1940s, according to the investigation, which was organized by the Organized Crime and Corruption Reporting Project, showed Credit Suisse kept more than $8 billion in the accounts of criminals, autocrats, and rights violators.
The bank rejected the conclusions because they were “based on partial, erroneous, or selective material taken out of context,” according to the bank.
Jamaican trial
Bidzina Ivanishvili, the former prime minister of Georgia, lost $553 million due to Credit Suisse Life Bermuda, a Credit Suisse affiliate. Failing to uphold its fiduciary obligation, according to a Bermuda judge’s ruling at the end of March 2022.
Patrice Lescaudron, a former star banker at Credit Suisse who sentence to five years in jail by Swiss authorities in 2018 on charges of fraud and forgery, was the person whose activities gave rise to the case. In 2020, Lescaudron committed suicide.
Because it prioritized the revenues, Mr. Lescaudron produced for Credit Suisse over the interests of its clients. The court determined that the Credit Suisse affiliate failed to stop the fraud.
Bulgarian Drug Cartel
A former employee was found guilty of aggravated money laundering over several transactions. She conducted or ordered it to be completed between July 2007 and December 2008, despite firm indications that the funds had criminal origins.
Her actions allowed the criminal gang to stash more than 19 million Swiss francs out of reach of the authorities.
Settling old Disputes
In October 2022, Credit Suisse said it would pay $495 million to settle a row with the US state. New Jersey over mortgage-backed securities dating back to the 2008 financial crisis.
That same month, France agreed to pay 238 million euros to avoid prosecution on money laundering and tax fraud charges. Brought in 2016 over undeclared accounts held by French nationals.
In connection with a money laundering case involving a Bulgarian cocaine network. Credit Suisse was hit with a $2 million punishment in June 2022.
The bank was found guilty of violating its corporate duty by the Swiss Federal Criminal Court for failing to take action to stop the criminal organization from laundering money.
Material Deficiencies
Due to a last-minute contact from the US Securities and Exchange Commission regarding changes to the cash-flow statements for 2019 and 2020.
Credit Suisse was forced to postpone the release of its annual report, which was intended to be released last week.
On Tuesday, when it finally issued the study, it admitted that its internal controls had “substantial flaws.”
Market panic was spurred by statements by Credit Suisse’s most prominent shareholder that it would not make additional investments in the bank. This followed contagion concerns following the failure of two American banks last week.
On the Swiss National Bank loan news, Credit Suisse shares increased by nearly 18%.
- Following the bank’s announcement, it will borrow up to $54 billion from the Swiss National Bank. Shares of Credit Suisse increased by nearly 30% at market opening.
- That comes after the main shareholder, the Saudi National Bank. Announced it would not pour in any additional funds due to regulatory limits. Sending shares of Credit Suisse plunging to a new record low.
- According to a statement from the Swiss National Bank and the Swiss Financial Market Supervisory Authority, Credit Suisse. ” Meets the capital and liquidity requirements imposed on systemically important banks.”
At the start of trading on Thursday, shares of Credit Suisse rose more than 30% after the bank announced it would borrow up to $50 billion ($54 billion) from the Swiss National Bank.
Despite a modest slowdown in the rise during the day’s trading, the shares of the Swiss-listed company were still up 18.8% as the markets closed in the late afternoon.
Swiss National Bank and the Swiss Financial Market Supervisory Authority.
Late on Wednesday, the troubled lender announced it would use its right to borrow money from the Swiss central bank under a covered loan facility and a short-term liquidity facility.
Credit Suisse “meets the capital and liquidity requirements imposed on systemically important institutions.”
According to a statement released Wednesday by the Swiss National Bank and the Swiss Financial Market Supervisory Authority.
Credit Suisse also made a debt buyback offer of almost 3 billion Swiss francs, covering ten senior debt securities issued in dollars and four senior debt securities denominated in euros.
Credit Suisse CEO Ulrich Koerner stated in the release on Wednesday that the steps show decisive action to strengthen Credit Suisse. We continue our strategic transformation to generate value for our clients and other stakeholders.
We appreciate the support of FINMA and the Swiss National Bank as we carry out our strategic change.
My team and I have determined to make quick progress in offering a more straightforward bank focused on its customers’ requirements.
Like many other European banks, the stock of Credit Suisse is the second-largest bank in Switzerland.
Started to decline at the beginning of the week due to concerns about contagion following the failure of Silicon Valley Bank.
The Swiss bank’s losses increased on Tuesday. It disclosed in its annual report that it discovered a “significant weakness” in its financial reporting for 2021 and 2022.
Though it claimed that this did not impair the accuracy of the bank’s financial accounts.
The SVB collapse fuels crisis fears as the decline in global bank stocks intensifies.
Tuesday saw more damage from the Silicon Valley Bank (SVB) collapse as pledges from President Joe Biden and other policymakers. Failed to soothe the markets and caused investors to reevaluate the outlook for interest rates.
After significant US initiatives to support banks by providing them with access to additional money. Failed to ease investor concerns about a possible global spread of the crisis to other lenders.
Biden made an effort to calm markets and depositors.
On Tuesday, banking stocks in Asia continued to fall.
With Japanese companies being hammered particularly hard and the whole market falling due to concern over systemic risk.
