Regulator censures Credit Suisse for Greensill blunders

(C) Reuters. FILE PHOTO: Switzerland’s national flag flies above a logo of Swiss bank Credit Suisse in front of a branch office in Bern, Switzerland November 29, 2022. REUTERS/Arnd Wiegmann/File Photo

By Noele Illien and Oliver Hirt

BERLIN (Reuters) – Swiss regulators have rebuked Credit Suisse for “serious” failings in its handling of a multi-billion business with now defunct financier Greensill, the third such public censure in two years.

The probe, which investigated Credit Suisse’s abrupt closure of $10 billion of funds linked to Greensill, found that although portrayed as low risk to investors, the bank had “little knowledge and control” over the claims underpinning the investments.

At the centre of the ill-fated scheme were supply chain finance deals, also known as reverse factoring, where companies can get cash from banks and funds such as Greensill Capital to pay suppliers.

The regulator, FINMA, said Credit Suisse, asset manager of the funds, did not select and review them, Greensill did, leaving the bank largely in the dark. Credit Suisse also left it to Greensill to arrange the insurance against loss.

The regulators also found that the misgivings of one banker at Credit Suisse about granting a loan to Greensill were overruled.

FINMA also issued a series of instructions to the bank on how it should improve risk controls as well as the launch of enforcement proceedings against managers involved.

It is the third such public shaming of Credit Suisse by the supervisor, who also criticised the bank in 2021 for spying on top executives and granting outsized loans to Mozambique linked to a corruption scandal that plunged it into a debt crisis.

Daniel Bosshard, an analyst with Luzerner Kantonalbank, said the FINMA report was alarming and showed how the bank was “flying blind” with Greensill.

The string of scandals have frustrated officials at FINMA, who struggle to hold bankers to account because Swiss rules only allow it to sanction directors if directly involved in wrongdoing rather than for general managerial lapses.

FINMA is not allowed to impose fines or other penalties.

Gerhard Andrey, a Swiss lawmaker, welcomed the fact that FINMA required Credit Suisse to document the responsibilities of its top 600 staff as a step towards more accountability.

“We don’t need more box ticking,” he said. “We need a change of culture.”

Credit Suisse CEO Ulrich Koerner said the announcement “underlines the importance of the actions we have taken in recent years to strengthen our risk and compliance culture”.