Credit Suisse “seriously breached” its commitments in the Greensill case

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

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

The troubled Swiss lender’s exposure to London-based Greensill Capital resulted in massive refunds to investors after the supply chain finance firm collapsed in early 2021.

“In its procedures, FINMA concluded that Credit Suisse Group seriously breached its supervisory duty to identify, limit and monitor risks in the context of its business relationship with Lex Greensill over a number of years,” the regulator said, adding that it also found “serious deficiencies in the bank’s organizational structures » in the period under investigation.

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

Credit Suisse CEO Ulrich Körner welcomed the conclusion of the FINMA 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 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 maximizing recovery for fund investors,” he said.

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

The Greensill saga was a key factor behind Credit Suisse’s massive overhaul of its risk management and compliance operations, along with the collapse of Archegos Capital.

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

FINMA announced on Tuesday that it has ordered remedial measures and opened four enforcement cases against former Credit Suisse executives.

“In the future, the bank will have to periodically review the most important business relationships (around 500) at executive board level, especially for counterparty risk,” the regulator said.

“In addition, the bank is required to register the responsibility of its approximately 600 highest-ranking employees in a responsibility document.”

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

“FINMA has not ordered the forfeiture of profits in connection with the proceedings, and the implementation of the additional measures is not expected to result in significant costs for Credit Suisse,” the bank added.

Credit Suisse shares fell 1.8% in early European trading.