Swiss banking watchdog Finma said it had previously been aware of queries raised by the US Securities and Exchange Commission into Credit Suisse Group AG’s control procedures but learned their full seriousness only last month, shortly before the postponement of the bank’s annual report.
(Bloomberg) — Swiss banking watchdog Finma said it had previously been aware of queries raised by the US Securities and Exchange Commission into Credit Suisse Group AG’s control procedures but learned their full seriousness only last month, shortly before the postponement of the bank’s annual report.
The delay of the publication helped accelerate the collapse in confidence in Credit Suisse that ultimately led to the state-brokered takeover by UBS Group AG announced on March 19. The regulator didn’t specify when it had been first informed of the correspondence between the bank and the US authority.
“The gravity of the SEC’s judgments and the necessity of postponing the reporting only became known to Finma shortly before the publication of the annual figures in March 2023,” Finma said in a statement Wednesday.
Correspondence between the US regulator and Credit Suisse publicly released on Tuesday shows that the SEC had been probing the bank and asking questions about its internal controls and potential remedies since last July, some eight months before investors were made aware.
Read More: Credit Suisse Shares Drop After SEC Query Delays Annual Report
“It is not unusual for foreign authorities to raise questions with Swiss banks,” Finma said in the statement. “It is clear that a bank must have functioning control processes and be able to clarify questions from foreign authorities promptly. That was not the case here.”
Material Errors
The US regulator had queried the bank about cash-flow statement revisions from 2019 and 2020, and asked it to provide a full description of the errors, including who identified them and when. The SEC also pushed the bank to justify why it considered the errors immaterial. The bank disclosed the accounting revisions in its 2021 annual report.
Correspondence between the bank and SEC continued for months, as the troubled bank underwent a complex restructuring following years of losses and scandals.
The bank initially downplayed the seriousness of problems, arguing in letters to the SEC that the errors were not material. The SEC pushed back, asking the bank to justify how it concluded that entity-wide material weaknesses did not exist.
“We acknowledge that the control deficiencies remained un-remediated for several years,” Credit Suisse ultimately wrote to the SEC. The bank declined to comment Tuesday.
Swiss lawmakers criticized Finma during two days of debate this week over approval of state guarantees now pledged to UBS in a bid to stem potential losses related to the integration of Credit Suisse. Others argued that the regulator should be given more power to rein in the banking sector’s excesses.
The lower house voted against providing the guarantees on Wednesday, in a largely symbolic vote that reflects a high degree of public discontent with the deal.
Read More: Swiss Lower House Censures UBS Guarantees in Symbolic Vote
(Adds details from parliamentary vote)
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