Credit Suisse will unveil a new centralized structure on Thursday in an attempt to bring its far-flung divisions to heel and draw a line under a string of scandals that have cost the Swiss bank billions of dollars, two sources said.
Over the past year, Credit Suisse has been fined for arranging a fraudulent loan to Mozambique, tarnished by its involvement with defunct financier Greensill, racked up $5.5 billion in losses when U.S. family office Archegos collapsed, and been rebuked by regulators for spying on executives.
Credit Suisse drafted in seasoned banker Antonio Horta-Osorio as chairman in April to stop the rot and he will lay out his charter to reform Switzerland’s second-biggest bank on Thursday when it presents third-quarter results.
One key change is expected to be the creation of a single wealth management division that caters to a global elite, centralizing oversight at the bank’s headquarters in Zurich, two people familiar with the matter told Reuters.
Under the current structure put in place six years ago, wealth management straddles three divisions: a Swiss business, an Asia-Pacific arm catering mainly to rich Chinese and an international arm based out of Switzerland.
Merging the wealth division would make Credit Suisse simpler and potentially pave the way for cost cuts.It would also rein in local bankers who have enjoyed much autonomy, making them more answerable to senior managers who have often been blindsided by the risks that triggered past scandals, the sources said.
One of the people told Reuters that managers at the bank’s headquarters had become very risk averse and they did not want to give leeway to local bankers, regardless of how much profit they were making. A spokesman for Credit Suisse declined to comment.
Credit Suisse’s financial humiliation stands in stark contrast to its cross-town rival UBS (UBSG.S). In the wake of massive losses and a bailout during the financial crisis, UBS successfully pivoted away from investment banking to wealth management and is now the world’s largest wealth manager with $3.2 trillion in invested assets.
Its shares have climbed 57% in the past 10 years while Credit Suisse has slumped 53% over the same period.Shareholders have deserted Credit Suisse this year following the slew of bad headlines. Its shares are down 12% while UBS is up 36% while Wall Street rivals are riding high on the back of a boom in equity trading and M&A.
Andreas Venditti, an analyst at Swiss private bank Vontobel, said it would take more than “minor changes and a new divisional set-up” at Credit Suisse to reverse the trend.The expected revamp at Credit Suisse has also encouraged some high-profile dealmakers to approach the bank’s senior management to suggest it merges with a rival, another person with knowledge of the matter said.
Those ideas have been rejected so far, however, the person said. Nonetheless, the prospect of a challenge by investors demanding the break-up of the bank, or that its shrinking market value makes it a target for a hostile foreign takeover, have long troubled managers, sources told Reuters earlier this year.
With a market value of $28 billion, Credit Suisse is worth less than half of UBS and a fraction of Wall Street giants such as JPMorgan (JPM.N) weighing in at half a trillion dollars. But an approach from the United States would not go down well in Switzerland. Relations between Swiss banks and Washington were damaged when the United States pressured them into giving up their strict secrecy code more than a decade ago.
A combination of Credit Suisse and UBS, which has been touted as an alternative alliance, would face its own problems. For one, it would dominate the Swiss market. Another source said that while Credit Suisse had examined a sale or spin-off of its asset management business, that had been shelved. The person said, however, that once further efforts were made to cut costs and boost growth, a sale, or listing of the business on the market, could be back on the cards.
The bank’s drive to centralize its operations is drawing on lessons from some of its recent failures, including Archegos. Earlier this year, Credit Suisse published a report blaming a focus on maximizing short-term profits and enabling “voracious risk-taking” by Archegos for failing to steer the bank away from catastrophe.
Despite long-running discussions about Archegos – by far the bank’s largest hedge fund client – Credit Suisse’s top management were apparently unaware of the risks it was taking.
The bank’s chief risk officer and the head of its investment bank recall hearing about it first only on the eve of the fund’s collapse. “There were numerous warning signals,” the report said. “Yet the business … failed to heed these signs.”
By Oliver Hirt and Pamela Barbaglia, John O’Donnell
Source: Credit Suisse to tighten the reins after string of scandals | Reuters
- “Corporate Governance Guidelines of Credit Suisse AG” (PDF). Credit Suisse. Archived from the original (PDF) on 6 June 2013. Retrieved 20 November 2012.
- “Organizational Guidelines and Regulations of Credit Suisse Group AG and of Credit Suisse AG” (PDF). Credit Suisse. Archived from the original (PDF) on 6 June 2013. Retrieved 20 November 2012.
- “Board of Directors”. Credit Suisse. Retrieved 5 March 2019.
- “Changes to the Executive Board”. Credit Suisse. Retrieved 13 February 2020.
- “Executive Board”. Credit Suisse. Retrieved 5 March 2019.
B. H. Meyer; Hans Dietler (1899). “The Regulation and Nationalization of the Swiss Railways
- Wilkins, Mira (2008). Global Electrification: Multinational Enterprise and International Finance in the History of Light and Power, 1878–2007. Cambridge University Press. p. 98. ISBN 978-0-521-88035-0.
Hill, Kelly (1999). Cases in Corporate Acquisitions, Buyouts, Mergers, and Takeovers. Gale. ISBN 0-7876-3894-3.
- “Nazi name lists in Argentina may reveal loot in Swiss bank”. BBC News. 5 March 2020. Retrieved 13 April 2021.
- Deters, Jannik. “Dokumentenfund in Argentinien: Credit Suisse soll milliardenschwere Nazi-Konten öffnen”. http://www.wiwo.de (in German). Retrieved 13 April 2021.
- Jung, Joseph (2002). Credit Suisse Group Banks in the Second World War: A Critical Review (2nd ed.). Neue Zürcher Zeitung. ISBN 3-85823-994-1.
- Honan, William H. (16 April 1999). “Estelle Sapir, 73, Who Fought Bank Over Holocaust Assets”. The New York Times. Retrieved 12 October 2012.
Atkinson, Mark (4 August 2000). “Swiss banks agree $1.25bn Holocaust deal”. The Guardian
- Business: When the Sure-Footed Stumble; Swiss Banks Stagger After Several Investing Missteps”. The New York Times. Retrieved 27 August 2012.
- “Wiesenthal Centre Reveals 12,000 Names of Nazis in Argentina, Many of Whom Apparently Had Accounts Transferred to Credit Suisse”. http://www.wiesenthal.com.
- “Banking: Suicide in Switzerland”. Time. Vol. 109 no. 21. 23 May 1977. p. 82.
- Gambee, Robert (1999). Wall Street: Financial Capital. W. W. Norton & Company. p. 123. ISBN 978-0-393-04767-7.
- Crabbe, Matthew (January 1989). “Gut’s Secret Money”. Euromoney. Archived from the original on 18 May 2013. Retrieved 27 August 2012.
- Greenhouse, Steven (10 April 1989). “Swiss Bank Turns Aggressive”. The New York Times. pp. D1–D2. Retrieved 27 August 2012.
Grant, Linda (19 August 1996). “Will CS First Boston Ever Win?”. Fortune. pp. 30–34. Archived from the original
- . “This Bank Keeps Growing And Growing And …” Business Week. p. 134. Retrieved 3 October 2012.
- Tagliabue, John (29 November 1996). “Taking the Challenge of Streamlining Credit Suisse”. The New York Times. pp. D9, D14. Retrieved 27 August 2012.
- “Credit Suisse Restructures”. The Banker. August 1996. p. 5.
Strom, Stephanie (30 July 1999). “Japan Revokes Credit Suisse Unit’s Banking License”. The New York Times.
- “Corporate Citizenship Report”.[permanent dead link][dead link]
- “Bankruptcy case heats up for former Oregon timber tycoon Tim Blixseth”. The Oregonian. Associated Press. 24 February 2010. Retrieved 30 November 2012.
- Church, Steven; Effinger, Anthony (6 April 2011). “Tim Blixseth facing forced bankruptcy over taxes”. Bloomberg. Retrieved 30 November 2012.
- Stempel, Jonathan (4 January 2010). “Credit Suisse sued over resorts, $24 billion sought”. Reuters.
- Mijuk, Goran (18 January 2008). “Credit Suisse Plans to Expand Private Banking World-Wide”. The Wall Street Journal. Retrieved 21 October 2012.
- Simonian, Haig (11 February 2009). “Credit Suisse losses widen to SFr8bn”. Financial Times. Retrieved 9 October 2012.
- “New York Sues Credit Suisse Over Mortgages”. The New York Times. Reuters. 20 November 2012. Retrieved 29 November 2012.
- Freifeld, Karen; Frankel, Alison (4 October 2012). “Exclusive: Credit Suisse probed over mortgages – sources”. Reuters. Retrieved 4 October 2012.
- Greil, Anita; Lucchetti, Aaron (26 September 2012). “Credit Suisse May Revamp Asset-Management Unit”. The Wall Street Journal. Retrieved 29 November 2012.
Kandell, Jonathan (March 2012). “Swiss Banks Adjusting To Radical New Regulations”. Institutional Investor. Vol. 46 no. 2. p. 33.
- “Credit Suisse banker arrested in Brazil tax probe”. Reuters. Retrieved 19 January 2013.
- Associate Press (11 February 2009). “Brazil Arrests 19 In Tax Evasion Scheme”. CBS News. Retrieved 19 January 2013.
- Browning, Lynnley; Werdigier, Julia (23 February 2011). “U.S. Accuses Four Bankers Connected to Credit Suisse of Helping Americans Evade Taxes”. The New York Times. Retrieved 19 November 2012.
- Voreacos, David (15 August 2011). “Credit Suisse May Settle U.S. Probe by Admitting Wrongdoing, Paying Fine”. Bloomberg. Retrieved 20 November 2012.
- Crawford, David; Saunders, Laura (11 July 2012). “Clients of Swiss Bank Raided in Tax Probe”. The Wall Street Journal.
- Bart, Katharina (20 November 2012). “Credit Suisse shuffles top executives, merges units”. Reuters. Retrieved 23 November 2012.
- Greil, Anita (17 September 2012). “Credit Suisse to Give More Files”. The Wall Street Journal. Retrieved 7 September 2013.
- Schoenberg, Tom; Voreacos, David (21 February 2014). “Credit Suisse to Pay $197 Million in SEC U.S. Client Case”. Bloomberg. Retrieved 27 March 2014.
- Han Shih, Toh (20 April 2013). “German prosecutors probe Credit Suisse tax evasion”. South China Morning Post. Retrieved 7 September 2013.
Crawford, David (8 November 2012). “Germany Probes UBS Staff on Tax-Evasion Allegations”. The Wall
- “Credit Suisse AG says not subject to Swiss competition foreign exchange probe”. Economic Times. 31 March 2014. Retrieved 8 August 2014.
- “Credit Suisse Pleads Guilty in Felony Case”. Dealbook – New York Times. Retrieved 20 May 2014.
- “Credit Suisse fined $2.6bn in US tax evasion case”. Switzerland News.Net. Archived from the original on 21 May 2014. Retrieved 20 May 2014.
- Bart, Katherina; Freifeld, Karen; Viswana, Aruna (22 May 2014). “Credit Suisse guilty plea has little immediate impact as shares rise”. Business Standard.
- Milmo, Dan (10 March 2015). “Prudential’s Tidjane Thiam to take top role at Credit Suisse”. The Guardian. Retrieved 10 March 2015.
- Ganesan, Gayathree. “Credit Suisse names new CEO of global markets”. Business Insider.
- Atkins, Ralph (5 September 2018). “Subscribe to read | Financial Times”. Financial Times. Retrieved 22 August 2020. Cite uses generic title (help)
- “Credit Suisse rüstet gegen Smartphone-Banken auf”. Handelszeitung (in German). Retrieved 6 September 2019.
Owen Walker (30 July 2020). “Credit Suisse launches restructuring after trading profit boost