International banks such as Goldman Sachs, JP Morgan and Deutsche Bank, not generally considered bastions of corporate virtue, all decided about two weeks after Russia’s invasion of Ukraine in February that they were to join in the great withdrawal of the world’s 12th economy.
It took another two weeks for Credit Suisse, one of the world’s most iconic banks, to say on March 28 that it had ceased doing business in Russia. It was the same day, as it happened, that the U.S. House of Representatives Oversight and Reform Committee began asking questions about the bank’s compliance with Western sanctions stemming from the war. .
Interest from U.S. lawmakers followed reports that Credit Suisse had asked hedge funds and other investors in early March to shred documents relating to a late-2021 deal to offload risks surrounding $2 billion ( 1.8 billion euros) in loans secured by jets, yachts and properties, some of which had defaulted following previous US sanctions against Russian oligarchs.
Credit Suisse, it must be said, was quick to provide a plausible explanation when the reports first emerged, insisting that it had only asked investors who had seen the documents of the transaction but had not participated in the transaction to destroy the material, “as is the case with the market practice”.
This is perhaps one of the most easily explained episodes of a bank that has otherwise limped from debacle to debacle in recent years.
Institutional Shareholder Services (ISS), a proxy advisory firm that makes voting recommendations to large investors in publicly traded companies, presented a reel of sorts in a report this week as the bank prepared for its general meeting. yearly at the end of the month. .
These include Credit Suisse, at the end of 2020, which became the first major Swiss bank in the country’s history to face criminal charges, for allegedly failing to do enough to prevent money laundering. assets linked to drug trafficking by a Bulgarian criminal organisation. The bank pledged to defend itself vigorously.
Then, in March last year, the bank revealed a trading loss of 4.4 billion Swiss francs (4.3 billion euros) linked to the collapse of a previously little-known American hedge fund called Archegos. CapitalManagement. It was the lender most affected by the implosion. And a bank-commissioned investigation found it knew that Archegos – which, under a former name, Tiger Asia, had settled insider trading allegations with the US Securities and Exchange Commission and pleaded guilty to federal wire fraud charges in 2012 – posed a huge risk.
In the same month, Credit Suisse’s reputation was further damaged by the collapse of UK supply chain finance company Greensill. The bank was therefore forced to freeze $10 billion in customer funds, which were mainly invested in the bankrupt company. It has so far managed to return $6.7 billion to investors.
In October, Credit Suisse agreed to pay $475 million in fines to settle with US and UK regulators after it admitted defrauding investors over loans it made in Mozambique. The loans would have been for government-sponsored investment programs, including a tuna fishery. However, some funds were used to pay bribes to local officials and bribes to Credit Suisse bankers.
The ISS list, however, omitted the fact that on the same day of the so-called “tuna bond affair” fine, the Swiss financial regulator published a report on an executive spy scandal that had cost to former Credit Suisse chief executive Tidjane Thiam about his job in 2020. He found that oversight of managers was broader than previously known and that the bank planned spy operations seven times between 2016 and 2019, and had made most of them.
Meanwhile, Antonio Horta-Osario, the veteran Portuguese banker who was named president last April to stop the rot, resigned suddenly in January, with his promise to develop “a culture of personal responsibility and responsibility” contributing to his loss. It came after it was discovered he had flouted Covid-19 quarantine rules in the UK and Switzerland, including on a trip to London last year to watch the tennis final of Wimbledon, and that he had used the bank’s private jet to drop him off in the Maldives for a personal vacation.
The ISS roundup ends with a self-proclaimed whistleblower leaking data on more than 18,000 bank accounts, exposing how the bank allegedly held hundreds of millions of dollars for heads of state, intelligence officials, sanctioned businessmen and perpetrators of human rights violations, among others. Credit Suisse said the allegations raised dated back to the 1940s and most of the accounts it had reviewed had already been closed.
Yet the board, under the chairmanship of Swiss insurance veteran Axel Lehmann since January, must be relieved to be able to get away with holding a general meeting later this month for a third consecutive year without having to face the shareholders in person.
Hoi polloi at bay
With Irish, UK and North American businesses largely returning to physical gatherings for the upcoming AGM season, many businesses in mainland Europe have opted to keep hoi polloi at bay once again. Credit Suisse points to “continuing uncertainties” around the Covid-19 pandemic as the reason, even though Switzerland lifted remaining restrictions earlier this month.
It won’t be enough to pull the bank off the hook. Swiss listed companies are required by national law to ask shareholders to exonerate directors from liability for known events, making it difficult for those supporting the motion to bring future legal action for willful misconduct. or negligence.
This week, ISS and its counterpart Glass Lewis each took the unusual step of calling on shareholders to vote against exempting the board and management from liability for the incidents in 2020.
Credit Suisse may have been among the few major banks to emerge relatively unscathed from the financial crisis – having avoided the ignominy of a government bailout thanks to a 2008 investment from a group of shareholders led by the sovereign wealth fund of Qatar.
But in an industry that has been beset by a series of scandals since, few face the monumental struggle of this 170-year-old bank to restore its reputation.
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