Credit Suisse finds ‘material’ control lapses after SEC check

BLOOMBERG

Credit Suisse Group said it found “material weaknesses” in its reporting and control procedures for the past two years, after questions from US regulators.
The Zurich-based bank said it will take steps to fix ineffective checks on the process it follows to pull together its financial reports. But the firm said its statements for 2022 and 2021 “fairly present” its financial condition.
Credit Suisse was forced to delay the release of its annual report from last week after the Securities and Exchange Commission (SEC) raised last-minute queries on cash-flow statements from 2019 and 2020, discussions which the bank said have now been concluded. Chief Executive Officer Ulrich Koerner is attempting to push through a complex restructuring in a bid to return the bank to profitability, a process now at risk of becoming bogged down in a broader financial-sector selloff linked to US lender Silicon Valley Bank.
The reassessment comes in parallel to an “adverse opinion” issued by accountancy firm PwC on the effectiveness of the group’s internal controls. The bank said the material weaknesses played a part in the revisions it had to make a year ago to some past years’ statements. Credit Suisse said its efforts to address the issue “could require us to expend significant resources to correct the material weaknesses or deficiencies.”
Shares of the Swiss lender fell as much as 5.6% on Tuesday. The stock is trading near a record low after a 20% drop this year. Government bonds jumped as the announcement added to concern about stress in the banking sector and boosted demand for haven assets.
The yield on the two-year Treasury extended a drop on Tuesday before recovering to hover around 4%. Futures on the S&P 500 and Nasdaq 100 rose about 0.2%. Credit Suisse shares dropped almost 10%.
In 2021, Credit Suisse suffered a multi-billion dollar hit linked to Archegos Capital Management, the family office linked to investor Bill Hwang. It subsequently issued a report that identified procedural deficiencies leading to the debacle. The bank has also completely reshuffled top management since then and is on its second re-boot plan in as many years.
In the compensation report, the bank said Chairman Axel Lehmann is forgoing a payment of 1.5 million Swiss francs ($1.6 million) for his first full year on the job, following the lender’s worst annual performance since the 2008 financial crisis.
Lehmann, who took up the role in January 2022, will not receive the standard fee that’s usually paid on top of board members’ salaries, according to the bank’s compensation report published after a delay of several days due to a last-minute query by US regulators.
Credit Suisse has been dogged by outflows of client cash since the last quarter of 2022, when more than 110 billion francs was pulled. The bank said that withdrawals had continued into this month, even after it started a huge campaign to win back client confidence.