By Katharina Bart, Karen Freifeld and Aruna Viswanatha
WASHINGTON/NEW YORK/ZURICH (Reuters) - Credit Suisse saw little immediate impact on Tuesday after it became the largest bank in decades to plead guilty to a U.S. criminal charge and will pay more than $2.5 billion in penalties for helping Americans evade taxes.
The bank's guilty plea resolves its long-running dispute with the United States over the probe and marks a rare criminal indictment for a major financial institution.
The Justice Department has not often pursued such convictions for fear they could destabilize large financial firms and wider markets, but lawmakers have recently pressured authorities to show that banks are not "too big to jail."
Credit Suisse said it had not seen a material impact in the past few weeks on its business, and that clients faced no legal obstacles from doing business with it despite the guilty plea.
But some analysts said clients and counterparties could still pull their business in the coming weeks. "While we expect that this event has been well-flagged and the impact likely to be muted, there is always the small risk of unintended consequences," Citigroup analysts Kinner Lakhani and Nicholas Herman wrote in a note to investors.
Credit Suisse shares closed up 0.96 percent on Tuesday.
Switzerland's second-largest bank escaped more dramatic outcomes for its business - the New York state bank regulator decided not to revoke the bank's license in the state. Also, its top management stayed in place and it will not have to hand over specific client data, protected by Swiss secrecy laws, though it will turn over some account information.
U.S. prosecutors said Credit Suisse helped clients conceal assets in secret accounts that were not disclosed to U.S. tax authorities, in a conspiracy that spanned decades, and for one of the bank's units, involved practices that began more than a century ago.
"This case shows that no financial institution, no matter its size or global reach, is above the law," Attorney General Eric Holder said at a news conference in Washington.
"We deeply regret the past misconduct that led to this settlement," Credit Suisse Chief Executive Officer Brady Dougan said in a statement.
Another global bank, BNP Paribas, is expected to submit to a similar plea as it works to resolve a criminal probe into whether it violated U.S. sanctions on Sudan and other countries, people familiar with the matter have said.
Credit Suisse will pay the penalties to the U.S. Department of Justice, the Internal Revenue Service, the Federal Reserve and New York's banking regulator, the New York State Department of Financial Services. It had already paid just under $200 million to the Securities and Exchange Commission.
Switzerland's left-wing Social Democrats renewed a call first made last week for Dougan and other executives to step down to allow the bank to make a fresh start.
Asked whether he had considered such a move, Dougan, a 24-year veteran of the bank who took over as CEO in 2007, said resignation had "never been a consideration" and he remained committed to the bank.
New York bank regulators discussed replacing Dougan and others, a source familiar with the negotiations said. But in the end, the option was not made a condition of the deal.
"We'll see how it all shakes out," Benjamin Lawsky, who heads the New York Department of Financial Services, said on Tuesday after declining to comment on any negotiations about upper management. "In the short term, it's important that there be some stability at the firm as they get through this period."
The Swiss government said its main concern was that Credit Suisse was managed well and could move on, and that any change in leadership "wasn't the concern of politics." The bank's chairman, Urs Rohner, told Swiss radio on Tuesday that he and CEO Dougan personally had a clean record, but the same could not be said for the bank's behavior in past decades.
Switzerland's regulator effectively cleared the two, saying it had found no evidence that Credit Suisse top management knew of specific misconduct.
APPEASING INVESTORS
Credit Suisse will take an after-tax charge of 1.6 billion Swiss francs ($1.79 billion) in the second quarter for the fine, which dwarfs a $780 million penalty Swiss rival UBS AG paid to settle a U.S. tax dispute in 2009.
To appease investors, the bank will begin paying out roughly half its profits to shareholders once it hits a key capital ratio. It will also reduce assets, sell real estate and take other actions to help to meet the 10 percent capital ratio, which it expects to achieve by year-end.
"We see the size of the fine as affordable given the high ROE (return on equity) of Credit Suisse's businesses," Nomura analyst Jon Peace said. Peace, who rates the stock as a "buy", said the payout guidance gave the bank a yield premium compared to the sector.
HAND-DELIVERED CASH
The United States has been trying to wrest client data from Swiss banks in a long-standing fight with Switzerland and its bank secrecy laws. The standoff has already forced Wegelin & Co, the oldest Swiss private bank, to close shop after a guilty plea to charges of helping U.S. clients evade taxes.
Credit Suisse, which has a large business managing wealthy clients' money, helped them withdraw funds from their undeclared accounts by either providing hand-delivered cash to the United States or using Credit Suisse's correspondent bank accounts in the United States, the Justice Department said.
Prosecutors said Credit Suisse had around 22,000 U.S. client accounts worth around $10 billion, which included both declared and undeclared accounts, although the bank will not hand over any data of its American clients as part of the deal.
Bank account data, protected by Swiss secrecy laws, has proven a sticking point in the Credit Suisse probe and in the wider U.S. crackdown on the industry.
Credit Suisse's plea raises questions about roughly a dozen other Swiss banks including Julius Baer and Bank Pictet & Cie, also under criminal investigation in the United States.
New York's banking regulator said it would place a monitor of its choosing inside Credit Suisse, while the Fed said it was investigating whether other individuals should be subject to actions such as fines or bans. It did not name the individuals.
($1 = 0.8916 Swiss Francs)
(Reporting by Aruna Viswanatha in Washington, Karen Freifeld in New York, Katharina Bart and Oliver Hirt in Zurich, Joshua Franklin, Paul Arnold and Ruben Sprich in Bern; Additional reporting by Dan Wilchins and Richard Leong in New York and Douwe Miedema in Washington; Writing by Douwe Miedema; Editing by Jane Merriman and Lisa Shumaker)
