Credit Suisse once again faces accusations of wrongdoing, as the bank faces litigation for its illegal write-downs, associated with its trading division.
The allegations indicate the wrongful write-downs took place during 2015 and 2016. Meanwhile Credit Suisse has publicly denounced the claims, saying they are “without merit.”
What Went Wrong
The cause of the entire ordeal stems from an initial inquiry into the status of the bank’s trading unit by Credit Suisse Chief Executive Officer Tidjane Thiam. Together with CFO David Mathers, Mr. Thiam assessed the situation, and was rattled by the bank’s level of illiquid trades that the division held. In response, the two executives began a thorough write-down process, which took two and a half months to complete, and approached the $1 billion level.
At the forefront of the lawsuit, are pensions funds of police and firefighters in Birmingham, Alabama. The class action lawsuit currently addresses Mr. Thiam and Mr. Mathers’s involvement in providing investors with false information.
The misguided advice, given with regard to potentially high-risk propositions, led to a significant decline in the bank’s stock price, thereby inflicting heavy losses on investors and shareholders.
In response to the recently filed class action lawsuit, Suisse Bank has issued a statement: “The claim is unfounded and without merit… In the last three years, Credit Suisse has analyzed these allegations and responded to information requests from supervisory bodies. All regulatory reviews were closed without any action against Credit Suisse.”
Prior Accusations and Fines
Unfortunately for the Swiss bank, this is not the only time in recent memory that the bank’s conduct has been called into question. In November of last year, Credit Suisse was issued a hefty $135 million fine for misconduct and rigging practices in its FX trading arm.
New York State Department of Financial Services pointed to the unsound practices occurring during 2008 to 2015.
In another case, the Securities and Futures Commission (SFC) of Hong Kong, issued a $39 million fine against the bank for various issues of control failures and a lack of proper client securities segregation.
At the start of 2018, Credit Suisse has taken steps to reduce costs wherever possible. The Zurich-based bank has announced it will be closing one of its London offices, and will move some of its current staff to an alternative office space in the coming years.
The move will likely include additional cutbacks, after the UK offices have already been trimmed from 9,000 employees in 2015 to 6,500. The bank plans to shed more of its staff by an additional 1,500, which would bring their London operational occupancy to 5,000 members.