At Credit Suisse, number two in the Swiss banking sector, they hardly get a chance to catch their breath. The crisis bank just had to report a record loss of CHF 7.3 billion for 2022. Only a few weeks later, the Swiss Financial Market Authority (Finma) the results of their enforcement proceedings against the bank in connection with the Greensill funds. And what the supervisors write there sounds devastating.
As a reminder, in spring 2021 the British-Australian financial institution Greensill Capital went bankrupt. Entrepreneur Lex Greensill had financed supply chains, meaning he paid suppliers outright, charged a discount, and made a commensurate profit when buyers paid for supplies later. Credit Suisse had set up four supply chain financing funds with Greensill and raised money for them from its customers. A total of ten billion dollars went into the fund when several insurance companies withdrew their protection from Greensill in early 2021, thereby initiating the collapse of the financing company. In March 2021, Credit Suisse had to freeze its greensill funds – a dark chapter in the bank’s recent crisis history.
Credit Suisse breached regulatory obligations
Now it is clear what the regulator thinks of the Greensill affair. “Finma finds that Credit Suisse has seriously violated its regulatory obligations with regard to risk management and appropriate operational organization,” is the core sentence of the FINMA statement published on Tuesday. In it, the supervisors describe how Credit Suisse went into big business with Lex Greensill in 2017. Accordingly, specific insurance cover was provided for the fund, which was intended to protect the claims securitized therein against default by the buyer. Only: According to Finma, Credit Suisse had “little knowledge and control overall” about the securitized claims and also the insurance cover. Greensill himself was responsible for selecting and checking the claims and for insurance cover. This arrangement also proved to be breakneck because, according to Finma, Greensill was becoming increasingly risky over the years. The bank didn’t realize that.
Finma wants to prevent such a “serious violation of Swiss supervisory law” in the future. She therefore orders that Credit Suisse must regularly assess the risks of its 500 most important business relationships, at senior management level. In addition, the bank must record the areas of responsibility of its top 600 managers in a document and punish them in the event of misconduct. Finma also sends Credit Suisse an “auditor” to monitor compliance with these measures.
The bank itself announcedthat she welcomes the conclusion of the Finma process. This is “an important step on the way to finally overcoming” the Greensill matter, according to CEO Ulrich Körner. The bank continues to focus on “maximizing repayments to fund investors.” So far they have repaid 7.4 of the approximately ten billion dollars.