UK regulator puts Credit Suisse on watch list after scandals
Britain’s financial regulator has placed Credit Suisse on its watch list of institutions needing stricter oversight, the latest blow to a bank struggling to draw a line under a series of crises.
The Financial Conduct Authority told Credit Suisse last month it was taking the action because it was concerned the bank had not done enough to improve its culture, governance and risk controls.
In a letter sent in mid-May and seen by the Financial Times, regulators asked the bank’s senior management to provide evidence of steps it would take to prevent misconduct and improve accountability.
Officials also urged the bank to address “persistent” cultural issues, including a lack of internal challenges to risky transactions, and said they had yet to see “sufficient evidence of effective remediation”.
Being added to the watchlist signals that the FCA has serious concerns, according to a person familiar with how the list works. Only about 20 institutions are on the list at any given time out of the approximately 60,000 regulated by the FCA, the person added.
Groups on the list are closely monitored by high-level officials in the regulator, required to show progress and address the root causes of issues of concern.
Among the companies that were on the list are Lendy, the now-defunct UK peer-to-peer lender, and Provident Financial, the subprime lender that has been investigated by the regulator over its loan valuation.
Scandal after scandal at Credit Suisse over the past 24 months has exposed weak risk controls, forced the bank to issue a series of earnings warnings and sent its stock price plummeting.
Among the most high-profile is the implosion of Greensill Capital in March 2021, which forced the bank to close $10 billion in funds linked to the supply chain group. Weeks later, Credit Suisse suffered a $5.5 billion business loss – the largest in its 166-year history – following the collapse of the Archegos family office.
Last October, the bank agreed to pay a £147million FCA fine as part of a settlement package with four regulators in three countries for its role in the long-running ‘tuna bonds’ scandal. Mozambique.
The FCA has put the bank’s international division and UK operations on the watchlist because it regulates them.
In the May letter, the watchdog asked the bank to take a number of steps, including conducting a second-half review of the effectiveness of the board, risk and audit committees. of Credit Suisse International.
The FCA said it made the requests for review after consulting Finma, the Swiss regulator. Finma declined to comment.
The FCA is also concerned about whether the bank has properly reported breaches of conduct for a number of years, the letter said, which also noted a lack of curiosity on the part of the bank about the root causes. of its shortcomings.
In late April, Credit Suisse announced that David Mathers, the bank’s chief financial officer and managing director of Credit Suisse International, a position he has held since 2016, would step down from both roles once a successor has been found.
Several people with direct knowledge of the internal discussions said Mathers had been in talks with the group’s chief executive, Thomas Gottstein, about his departure for at least two years and that it was not related to any regulatory issues.
In a statement to the Financial Times, Credit Suisse said: “We do not comment on our discussions with regulators, and it would not be appropriate for us to do so. As we summarized earlier, we are now well advanced in executing the plan to strengthen our business and our risk culture. »
The FCA declined to comment.