Credit Suisse found guilty of ‘serious’ risk management breaches in Greensill affair

Credit Suisse “seriously breached” its supervisory risk management obligations over business relationships with financier Lex Greensill and his companies, the Swiss financial watchdog ruled this week. Concluding its investigation into the affair, the Swiss Financial Market Supervisory Authority (Finma) has ordered Credit Suisse to carry out remedial measures. The bank will have to periodically review its most important business relationships at executive board level. It has also been told to record the responsibilities of around 600 of its highest-ranking employees. In addition, Finma has opened enforcement proceedings against four unnamed former Credit Suisse managers. The watchdog has the power to ban individuals from holding senior roles at companies it regulates for up to five years. Finma’s investigation into Credit Suisse’s involvement with supply chain financing firm Greensill Capital, which collapsed in March 2021, concluded that the bank “seriously breached its supervisory duty to adequately identify, limit and monitor risks in the context of the business relationship with Lex Greensill over a period of years”. It also found “serious deficiencies” in the bank’s organisational structures during the period under investigation and that the company did not “sufficiently fulfil its supervisory duties as an asset manager”. “Finma thus concludes that there has been a serious breach of Swiss supervisory law,” said the regulator. Greensill lent money to firms by buying their invoices up front but collapsed after credit insurers withdrew cover over fears the company faced huge exposures. Credit Suisse launched the first of four supply chain finance funds in collaboration with Greensill back in 2017. But the bank closed the funds, which were described as low risk when distributed to investors, at short notice in 2021. Client exposure sat at around $10bn. Credit Suisse has been trying to recover the $10bn of funds trapped in Greensill. So far it has secured $7.2bn. The bank has also taken measures to bolster its risk management and compliance. Finma said Credit Suisse has adopted “a wide range of organisational measures based on its own investigation of the case”. “Governance structures were revised and control processes strengthened, namely in the approval and monitoring of fund products. Finma supports these measures. At the same time, Finma is ordering a number of other measures to further improve the banking group’s risk management and governance,” it added. Credit Suisse Asset Management (CSAM) has filed insurance claims related to the collapse of Greensill Capital. The claims stood at $2.2bn in the summer and sat against two of CSAM’s four supply chain finance funds linked to Greensill. Credit Suisse CEO Ulrich Körner welcomed the conclusion of the Finma investigation. “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 underlines the importance of the actions we have taken in recent years to strengthen our risk and compliance culture. We also continue to focus on maximising recovery for fund investors,” he said. Credit Suisse has been embroiled in a series of scandals. In October it agreed to pay $495m to settle allegations that it mis-sold mortgage-backed securities in the US. It also agreed to pay €238m to the French government to settle tax fraud allegations. A Swiss court fined the bank in June for failing to prevent money laundering, which allowed a Bulgarian criminal gang to launder drug money through the bank in 2007-2008.

Credit Suisse found guilty of ‘serious’ risk management breaches in Greensill affair

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