Credit Suisse ‘seriously failed’ in Greensill case

The Credit Suisse Group logo in Davos, Switzerland, Monday, January 16, 2023.

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Credit Suisse “has seriously breached its supervisory obligations” in its business relationship with financier Lex Greensill and his companies, Swiss regulator FINMA concluded on Tuesday.

The struggling Swiss lender’s exposure to London-based Greensill Capital led to massive repayments to investors after the supply chain finance company collapsed in early 2021.

“In its proceedings, FINMA concluded that Credit Suisse Group had seriously failed in its supervisory obligation to identify, limit and adequately monitor risks in the context of the business relationship with Lex Greensill on a period of several years,” the regulator said, adding that it had also found “serious deficiencies in the organizational structures of the bank” during the period under investigation.

“Furthermore, it has not sufficiently fulfilled its supervisory obligations as an asset manager. FINMA therefore concludes that there has been a serious breach of Swiss supervisory law.”

Credit Suisse CEO Ulrich Körner welcomed the conclusion of FINMA’s investigation in a statement on Tuesday.

“This marks an important step towards the final resolution of the SCFF issue. FINMA’s review has reinforced many of the findings of the Board-initiated independent review and underscores the importance of the steps we have taken in recent years. to strengthen our culture of risk and compliance.. We also continue to focus on maximizing recovery for fund investors,” he said.

In March 2021, Credit Suisse closed four supply chain finance funds linked to Greensill companies for the short term. The funds were distributed to accredited investors with client documentation indicating low risk, and client exposure was approximately $10 billion at the time of closing.

The Greensill saga was a major reason for Credit Suisse’s massive overhaul of its risk management and compliance operations, alongside the collapse of Archegos Capital.

Credit Suisse highlighted that, since March 2021, it has undergone leadership changes, implemented disciplinary measures and a new global accountability model, increased governance oversight and strengthened controls by moving risk oversight into a dedicated divisional risk management function.

FINMA announced on Tuesday that it had ordered corrective measures and opened four enforcement proceedings against former Credit Suisse executives.

“Going forward, the bank will have to periodically review at board level the most important business relationships (around 500) especially for counterparty risks,” the regulator said.

“In addition, the bank is required to record the responsibilities of its approximately 600 highest-ranking employees in an Accountability Document.”

Credit Suisse noted that all requirements identified by the regulator “are being addressed through the organizational measures already underway.”

“FINMA has not ordered any confiscation of profits as part of the proceedings and implementing the additional measures is not expected to result in significant costs to Credit Suisse,” the bank added.

Credit Suisse shares fell 1.8% in early trades in Europe.

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