Swiss banking sector in turmoil as Credit Suisse continues to face woes

Zurich: Credit Suisse Shares went into free fall on Wednesday, as the banking giant was hit by a series of scandals, seen as the “weakest link” in the Swiss banking sector.

Here’s an overview of the challenges facing Switzerland’s second-largest bank:

Greencell Bankruptcy

The catalog of difficulties began in 2021 with the collapse of Greencell, a British finance firm that specialized in short-term corporate loans through a complex and opaque business model.

Grencell’s collapse left many companies in trouble, but none more so than Credit Suisse, which had invested particularly heavily in the firm.

In March 2021, after Greencell declared bankruptcy, Credit Suisse Closed four linked funds with approximately $10 billion invested.

Swiss financial regulator Finma concluded that the bank “seriously breached its supervisory obligations” in the matter, and ordered “remedial measures”.

Archigos

Just four weeks later End of GrencellCredit Suisse was rocked by the execution of American hedge fund Arcegos, which cost the bank more than $5 billion.

Loans to Mozambique

In October 2021, the bank was fined $475 million by US and British authorities after it was caught up in a bribery scandal involving loans to state-owned companies in Mozambique.

Credit granted between 2013 and 2016 was supposed to finance marine surveillance, fishing and shipyard projects, but was partially diverted for bribes.

The bank agreed with British authorities to cancel $200 million owed to the country, which Serious financial crisis.

Violation of Covid rule

Antonio Horta-Osorio, the former head of Lloyds Banking Group, was brought in as chairman of Credit Suisse in April 2021, pledging to put better risk management at the heart of its culture.

But less than nine months later, he resigned after it emerged he had breached Switzerland’s Covid quarantine laws.

‘Swiss Secret’

A media investigation published in February 2022, dubbed “Suisse Secrets”, alleged that the bank had held billions of dollars in dirty money for decades.

The investigation, which was coordinated by the Organized Crime and Corruption Reporting Project, said leaked information on more than 18,000 bank accounts dating back to the 1940s showed that Credit Suisse had access to criminals, dictators and rights holders. Violators have more than $8 billion in accounts.

The bank rejected the findings, saying they were “partial, inaccurate, or based on information selected out of context.”

The Bermuda Trial

In late March 2022, a Bermuda judge ruled that former Georgian Prime Minister Bidzina Ivanishvili was liable for $553 million in damages due to the failure of Credit Suisse Life Bermuda, an affiliate of Credit Suisse, to meet its obligations. had to face it.

The case stems from the actions of former Credit Suisse star banker Patrice Liscadron, who was sentenced to five years in prison by Swiss authorities in 2018 for fraud and forgery. Lescaudron died by suicide in 2020.

The court found that the Credit Suisse affiliate did not prevent the fraud because “it was Mr. Liscadron’s prioritization of the revenue generated for Credit Suisse over the interests of his clients.”

The Bulgarian Cocaine Network

In June 2022, Credit Suisse was slapped with a $2 million fine in a money laundering case linked to a Bulgarian cocaine network.

Switzerland’s Federal Criminal Court found that the bank had failed to take steps to prevent money laundering by a criminal organization, holding it guilty of breaching its corporate responsibility.

A former employee was found guilty of money laundering on a number of transactions he made or ordered to be made between July 2007 and December 2008, despite the fact that the funds were criminally based.

His actions allowed the criminal gang to keep more than 19 million Swiss francs out of the reach of the authorities.

Settling old disputes

In October 2022, Credit Suisse said it would pay $495 million to settle a dispute with the US state of New Jersey over mortgage-backed securities linked to the 2008 financial crisis.

In France the same month, it agreed to pay 238 million euros to avoid prosecution over money laundering and tax fraud charges brought in 2016 on undeclared accounts of French nationals.

‘Material Weaknesses’

Credit Suisse was forced to postpone its annual report after a last-minute call from the US Securities and Exchange Commission to revise its 2019 and 2020 cash flow statements, which were due to be published last week.

When it finally released the report on Tuesday, it acknowledged “material weaknesses” in its internal controls.

After fears of contagion from the collapse of two US banks last week, comments by Credit Suisse’s main shareholder that it would not put more money into the bank sent panic into the market.