Credit Suisse had a message for investors during its recent earnings call. The bank was planning to change course after a tumultuous 12 months in which it was embroiled in the collapse of the US hedge fund Archegos and the supply-chain finance company Greensill Capital.
“This will not be a quick fix, and we expect 2022 will be a transition year,” the chief executive, Thomas Gottstein, said on a conference call on 10 February. “But we have made clear progress in creating the conditions for a much more stable and predictable bank.”
More “predictable”, in banking parlance, was code for reining in its riskier investment bank – which offers trading, fundraising services and deal advice to firms – and pivoting towards a more stable source of income: wealth management.
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What is the Suisse secrets leak?
Suisse secrets is a global journalistic investigation into a leak of data from the Swiss bank Credit Suisse. It comprises more than 18,000 bank accounts that were leaked to Süddeutsche Zeitung by a whistleblower who said Swiss banking secrecy laws were "immoral". The data, which is only a partial capture of the bank’s 1.5 million private banking clients, is linked to more than 30,000 Credit Suisse clients. The leak includes personal, shared and corporate bank accounts – holding, on average, 7.5m Swiss francs (CHF). Almost 200 accounts in the data are worth more than 100m CHF, and more than a dozen are valued in the billions. While some accounts in the data were open as far back as the 1940s, more than two-thirds were opened since 2000. Many of those were still open well into the last decade, and a portion remain open today.
The Guardian was among more than 48 media partners around the world including journalists at Le Monde, NDR, the Miami Herald and the New York Times. They spent months using the data to investigate the bank, in a project coordinated by Süddeutsche Zeitung and the Organized Crime and Corruption Reporting Project (OCCRP). They unearthed evidence Credit Suisse accounts had been used by clients involved in torture, drug trafficking, money laundering, corruption and other serious crimes, suggesting widespread failures of due diligence by the bank. It is not illegal to have a Swiss account and the leak also contained data of legitimate clients who had done nothing wrong. In its response, Credit Suisse said it "strongly rejects the allegations and inferences about the bank’s purported business practices".
Yet that pillar of Credit Suisse’s business – cultivating rich clients for a range of banking services – is precisely what has come under the spotlight in the revelations in the Suisse secrets project.
A massive leak has revealed that Credit Suisse harboured the hidden wealth of clients involved in torture, drug trafficking, money laundering, corruption and other serious crimes. The revelations point to apparently widespread failures of due diligence by the lender, despite repeated pledges to weed out dubious clients and stamp out illicit funds.
In response, Credit Suisse said it was unable to comment on specific clients but “strongly rejects the allegations and inferences about the bank’s purported business practices”, which it said were “based on partial, selective information taken out of context, resulting in tendentious interpretations of the bank’s business conduct”.
However, the simultaneous disclosures by 48 media organisations have raised painful questions for the bank. For anyone who has followed the string of scandals in recent years, they will have a familiar ring.
Has Credit Suisse had a high tolerance for risky clients? Has it done enough to strengthen internal due diligence controls? Was there a culture in which bankers held their noses and looked the other way when taking or keeping money from dubious clients, particularly public officials who might have been involved in corruption? Did profit take priority over ethics?
In its response to the media, the bank says these are historical matters relating to a tiny fraction of its customers. It says it has kept pace with banking regulations across the sector, putting in place a strict zero-tolerance policy towards tax evasion and stringent control measures to counter money laundering.
Yet Credit Suisse has spent decades apologising for past horrors, only for more skeletons to emerge from its cupboards.
Its newly installed chairman, Axel Lehmann, will be hoping the Suisse secrets leak will be just another public relations crisis for the bank, and there have been no shortage of those. In the past six months, the lender admitted to defrauding investors as part of the historical Mozambique “tuna bonds” loan scandal and Lehmann’s immediate predecessor, António Horta-Osório, resigned over Covid regulation breaches.
But these disclosures also threaten to throw a spanner in the works of an aggressive restructuring plan that relies on squeezing more money out of its wealth management division.
Credit Suisse is one of the largest wealth managers in the world, handling more than 1.6tn Swiss francs (CHF) (£1.3tn) for clients. With plans to divert 3bn CHF-worth (£2.4bn) of resources from the investment bank and towards the wealth management division by 2024, and hire at least 500 relationship managers to find and serve wealthy customers, the overhaul has been viewed by analysts as a sensible response to recent woes involving complex investment products and its services to hedge funds.
Part of the bank’s growth strategy will involve courting clients in emerging markets, where there is a greater risk of corruption.
Credit Suisse has struggled in recent years to keep bosses in the job long enough to see through significant changes. But if Gottstein and Lehmann are to regain the trust of markets and regulators, they will have to prove their aversion to dubious clients, no matter how lucrative their accounts may be.