International banks such as Goldman Sachs, JP Morgan and Deutsche Bank, not ordinarily held up as bastions of corporate virtue, all decided about two weeks after Russia's invasion of Ukraine in February that they needed to join the great retreat from world's 12th largest economy.
It took a further two weeks for Credit Suisse, one of the world's most iconic banks, to say, on March 28th, it had stopped chasing business in Russia. This was on the same day, as it happened, that the US House of Representative' Committee on Oversight and Reform started asking questions about the bank's compliance with western sanctions stemming from the war.
The interest of US lawmakers followed news 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 the risks surrounding $2 billon (€1.8 billion) of loans backed by jets, yachts and property, some of which had been defaulted upon as a result of previous US sanctions against Russian oligarchs.
Credit Suisse, it must be said, was quick to come out with a plausible explanation when the reports first emerged, insisting it had only asked investors that had seen deal documents but did not participate in the transaction to destroy the material, “as is market practice”.
It may be one of the more easily explained episodes at a bank that has otherwise limped from one debacle to another in recent years.
Institutional Shareholder Services (ISS), a proxy advisory company that makes voting recommendations to large investors in publicly quoted companies, offered up something of a lowlights reel in a report this week as the bank prepared for its annual general meeting at the end of the month.
They include Credit Suisse, in late 2020, becoming the first major Swiss bank in the country’s history to face criminal charges, for allegedly failing to do enough to prevent the money laundering of assets linked to drug trafficking by a Bulgarian criminal organisation. The bank has vowed to defend itself vigorously.
Then, in March of last year, the bank disclosed a 4.4 billion Swiss franc (€4.3 billion) trading loss relating to the collapse of a previously little-known US hedge fund called Archegos Capital Management. It was the worst-affected lender by the implosion. And an investigation commissioned by the bank revealed that it knew Archegos – which under a previous 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 – was a massive risk.
Frozen funds
The same month, Credit Suisse’s reputation was further dented by the collapse of UK supply-chain finance firm Greensill. The bank was forced as a result to freeze $10 billion of client funds, which were mostly invested in the failed company. It has managed so far 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 admitting to defrauding investors on loans it made in Mozambique. The loans were said to be aimed at government-sponsored investment schemes, including a tuna fishery. However, some funds were used to pay bribes to local government officials and kickbacks to then bankers at Credit Suisse.
The ISS list, however, left out the fact that on the same day of the so-called "tuna bond affair" fines, the Swiss financial regulator published a report into an executive spying scandal that had cost former Credit Suisse chief executive Tidjane Thiam his job in 2020. It found that manager surveillance was broader than previously known and that the bank had planned spying operations on seven occasions between 2016 and 2019, and carried out most of them.
Meanwhile, Antonio Horta-Osario, the seasoned Portuguese banker who was brought in as chairman last April to stop the rot, resigned suddenly in January, with his pledge to develop "a culture of personal responsibility and accountability" contributing to his undoing. It came after he was found to have flouted Covid-19 quarantine rules in the UK and Switzerland, including on a trip to London last year to watch the Wimbledon tennis finals, and used the bank's private jet to drop him off in the Maldives for a personal holiday.
The ISS round-up concludes with the leak by a self-described whistleblower of 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 human rights abusers, among others. Credit Suisse has said that the allegations raised date back as far as the 1940s and that most of the accounts it has reviewed had already been closed.
Still, the board, under the chairmanship of Swiss insurance veteran Axel Lehmann since January, must be relieved that it will be able to get away with holding an AGM later this month for a third year running without having to face shareholders in person.
Hoi polloi at bay
While Irish, UK and North American companies are largely returning to physical gatherings for the upcoming AGM season, many in continental Europe have elected to keep the hoi polloi at bay again. Credit Suisse is sticking to "ongoing uncertainties" around the Covid-19 pandemic as its reason, even though Switzerland lifted remaining restrictions at the start of the month.
It won’t be enough to get the bank off the hook. Publicly quoted Swiss companies are required by national law to ask shareholders to absolve directors from liability for known events, making it difficult for those that support the motion to take any legal future action for wilful misconduct or negligence.
This week, ISS and its peer Glass Lewis each took the unusual step of calling on shareholders to vote against exempting the board and management from liability for incidents in 2020.
Credit Suisse may have been among the few major banks to emerge from the financial crisis relatively unscathed – having avoided the ignominy of a government bailout thanks to a 2008 investment from a group of shareholders led by Qatar’s sovereign wealth fund.
But in a sector that has been chastened by a slew of scandals ever since, few face the monumental struggle of this 170-year-old bank in restoring its reputation.
