Credit Suisse's scandals, challenges: Spies, lies, and money laundering

Credit Suisse is in the throes of one of the biggest challenges in its history, hurt by a slump in stock price and the worsening of a key gauge of its credit risk ahead of a planned revamp.

The bank is battling market scepticism about its financial health after a string of scandals, months after it was found guilty by Switzerland's Federal Criminal Court of failing to prevent money laundering in the country's first criminal trial of one of its major banks.

Here are the main crises the bank has faced in recent years:

CREDIT DEFAULT SWAP SPIKE

Already wobbling under pressure from a declining stock price, the bank in October saw its credit default swaps surge to the highest level in two decades.

That has made investors jittery about the Swiss financial giant's liquidity and capital, and prompted Chief Executive Officer Ulrich Koerner to reassure shareholders. Later this month, the bank is set to release its blueprint for a structural overhaul, which is expected to shed more light on its plans to scale back the investment bank into a ‘capital-light, advisory-led’ business and strategic options for the securitised products unit.

COCAINE-RELATED LAUNDERING

In June, the bank was convicted of failing to prevent money laundering by a Bulgarian cocaine trafficking gang.

The court found deficiencies within Credit Suisse regarding both its management of client relations with the criminal organisation and its monitoring of the implementation of anti-money laundering rules.

Both Credit Suisse and the convicted former employee had denied wrongdoing. Credit Suisse said it would appeal the conviction.

BERMUDA TRIAL

A Bermuda court ruled in March that former Georgian Prime Minister Bidzina Ivanishvili and his family are due damages of more than half a billion dollars from Credit Suisse's local life insurance arm.

The court said Ivanishvili and his family were due the damages as a result of a long-running fraud committed by a former Credit Suisse adviser, Pascale Lescaudron.

‘SUISSE SECRETS’

Credit Suisse denied allegations of wrongdoing after dozens of media outlets in February published results of coordinated, Panama Papers-style investigations into a leak of data on thousands of customer accounts in previous decades.

The allegations in the "Suisse Secrets" media articles included that the bank had human rights abusers and businessmen under sanctions among its clients.

CHAIRMAN EXIT

Chairman Antonio Horta-Osorio resigned in January after flouting quarantine rules. The abrupt move came less than a year after Horta-Osorio was brought in to clean up the bank’s corporate culture marred by its involvement with collapsed investment firm Archegos and insolvent Greensill Capital.

TUNA BOND FRAUD

Credit Suisse pleaded guilty to defrauding investors over an $850 million loan to Mozambique meant to pay for a tuna fishing fleet and is paying US and British regulators $475 million to settle the case under a deal announced in October.

ARCHEGOS DEFAULT

Credit Suisse lost $5.5 billion when U.S. family office Archegos Capital Management defaulted in March 2021.

The hedge fund's highly leveraged bets on certain technology stocks backfired and the value of its portfolio with Credit Suisse plummeted.

An independent report into the incident criticised the bank's conduct, saying its losses were the result of a fundamental failure of management and control at its investment bank, and its prime brokerage division in particular.

GREENSILL FUNDS COLLAPSE

Credit Suisse was forced to freeze $10 billion of supply chain finance funds in March 2021 when British financier Greensill Capital collapsed after losing insurance cover for debt issued against its loans to companies.

The Swiss bank had sold billions of dollars of Greensill’s debt to investors, assuring them in marketing material that the high-yield notes were low risk.
 

SHAREHOLDER ANGER
 

Credit Suisse shareholders rejected a proposal from the bank's board to discharge management from other liabilities for 2020, highlighting shareholder anger of the bank's costly missteps.

The vote garnered only 35.88 per cent approval at the bank's AGM in April, as proxy advisers pointed to risk and control deficiencies leading up to the Greensill and Archegos meltdowns.

That leaves room for shareholders to hold directors responsible for wilful or grossly negligent violations of their duties under Swiss rules.
 

SPYING SCANDAL

Credit Suisse Chief Executive Tidjane Thiam was forced to quit in March 2020 after an investigation found the bank hired private detectives to spy on its former head of wealth management Iqbal Kahn after he left for arch rival UBS. Credit Suisse repeatedly played down the episode as an isolated incident.