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Credit Suisse's troubles - spies, money laundering and central bank cash

Published 03/16/2023, 06:44 AM
Updated 03/16/2023, 06:46 AM
© Reuters. FILE PHOTO: A view of the Swiss Federal Criminal Court in Bellinzona, Switzerland February 9, 2022. Picture taken February 9, 2022. REUTERS/Stephanie Ulmer Nebehay

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(Reuters) -Credit Suisse is to borrow up to $54 billion from the Swiss central bank to bolster liquidity and reassure investors after its shares slumped on fears of contagion from a banking crisis in the United States.

The central bank lifeline is expected to give the Swiss bank time to carry out a major overhaul it had already embarked on in 2022 to recover from a string of scandals, losses and lawsuits.

Here are some of the crises the bank has faced in the past few years (in reverse chronological order):

SWISS CENTRAL BANK CASH

Credit Suisse in March 2023 had to tap the Swiss central bank for up to $54 billion to shore up liquidity and investor confidence, after its shares slumped to record lows in the wake of a bank collapse in the United States that triggered fears of bank runs around the world.

The Zurich based bank became the first major global bank to be thrown an emergency lifeline since the 2008 financial crisis.

Credit Suisse led a selloff in bank shares in Europe after its largest investor Saudi National Bank said it could not provide more financial assistance because of regulatory constraints.

'MATERIAL WEAKNESSES'

Credit Suisse's 2022 annual report identified "material weaknesses" in internal controls over financial reporting.

Auditor PricewaterhouseCoopers included in the report an "adverse opinion" on the effectiveness of the bank's internal controls over its reporting but its statements "present fairly, in all material respects" the financial position of the bank in 2020 through 2022.

Swiss regulator FINMA said the bank must have appropriate control processes in place.

BIG LOSSES AND OUTFLOWS

Credit Suisse in February 2023 reported a total net loss of more than 7 billion Swiss francs for 2022, its biggest loss since the 2008 financial crisis and it warned of a "substantial" loss for 2023.

The bank saw an acceleration in withdrawals in the fourth quarter of 2022, with outflows of more than 110 billion Swiss francs, but it said the picture had been improving.

COCAINE-RELATED MONEY LAUNDERING

In June, the bank was convicted of failing to prevent money laundering by a Bulgarian cocaine trafficking gang.

The court found deficiencies within Credit Suisse regarding both its management of client relations with the criminal organisation and its monitoring of the implementation of anti-money laundering rules.

Both Credit Suisse and the convicted former employee had denied wrongdoing. Credit Suisse said it would appeal the conviction.

BERMUDA TRIAL

A Bermuda court ruled in March 2022 that former Georgian Prime Minister Bidzina Ivanishvili and his family are due damages of more than half a billion dollars from Credit Suisse's local life insurance arm.

The court said Ivanishvili and his family were due the damages as a result of a long-running fraud committed by a former Credit Suisse adviser, Pascale Lescaudron.

Lescaudron was convicted by a Swiss court in 2018 of having forged the signatures of former clients, including Ivanishvili, over an eight-year period.

Credit Suisse has said it expects the case, which it is appealing, to cost it around $600 million.

'SUISSE SECRETS'

Credit Suisse denied allegations of wrongdoing after dozens of media outlets in February 2022 published results of coordinated, Panama Papers-style investigations into a leak of data on thousands of customer accounts in previous decades.

CHAIRMAN EXIT

Chairman Antonio Horta-Osorio resigned in January 2022 after flouting COVID-19 quarantine rules.

The abrupt move came less than a year after Horta-Osorio was brought in to clean up the bank's corporate culture marred by its involvement with collapsed investment firm Archegos and insolvent supply-chain finance firm Greensill Capital.

ARCHEGOS DEFAULT

Credit Suisse lost $5.5 billion when U.S. family office Archegos Capital Management defaulted in March 2021.

The hedge fund's highly leveraged bets on certain technology stocks backfired and the value of its portfolio with Credit Suisse plummeted.

An independent report into the incident criticised the bank's conduct, saying its losses were the result of a fundamental failure of management and control at its investment bank, and its prime brokerage division in particular.

GREENSILL FUNDS COLLAPSE

Credit Suisse was forced to freeze $10 billion of supply chain finance funds in March 2021 when British financier Greensill Capital collapsed after losing insurance cover for debt issued against its loans to companies.

Swiss regulators have rebuked Credit Suisse for "serious" failings in its handling of the multi-billion dollar business with Greensill.

SHAREHOLDER ANGER

Credit Suisse shareholders rejected a proposal from the bank's board to discharge management from other liabilities for 2020, highlighting investor anger at the bank's costly missteps.

SPYING SCANDAL

Credit Suisse CEO Tidjane Thiam was forced to quit in March 2020 after an investigation found the bank hired private detectives to spy on its former head of wealth management Iqbal Kahn after he left for arch rival UBS.

© Reuters. FILE PHOTO: A view of the Swiss Federal Criminal Court in Bellinzona, Switzerland February 9, 2022. Picture taken February 9, 2022. REUTERS/Stephanie Ulmer Nebehay

Switzerland's financial regulator said Credit Suisse had misled it about the scale of the spying. The regulator said the bank planned seven different spying operations between 2016 and 2019 and carried out most of them.

In response, Credit Suisse said it condemned the spying and had taken "decisive" steps to improve its governance and strengthen compliance.

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