In this article, we discuss the recent developments surrounding Credit Suisse, the Swiss bank that has recently come under fire due to criticism from US regulators and mass customer withdrawals. We take a closer look at the causes of the bank’s problems and the possible consequences for the future.
Credit Suisse under fire: criticism from US regulators
Credit Suisse, the Swiss bank, has drawn considerable criticism received from US regulators. This was revealed in the bank’s 2022 annual report, the publication of which was delayed last week due to questions from the US Securities and Exchange Commission (SEC). The report says that “material deficiencies” were found in the audit of the bank’s financial reporting over the past two years. This has led to massive customer withdrawals due to concerns about the future of the bank.
Mass customer withdrawals
While Credit Suisse claims its financial reporting for 2021 and 2022 accurately reflects the bank’s financial condition, the bank has experienced significant capital outflows and some costly scandals. For example, Credit Suisse was involved with investment fund Archegos and financing company Greensill, both of which led to major losses for the bank. This has led to increasing pressure on the bank to improve its financial controls and to restructure the company.
These challenges have taken a heavy toll on Credit Suisse. In November 2021, following a flurry of social media reports about the bank’s financial health, clients have withdrawn €87 billion from the bank’s wealth management division. In addition, the bank has suffered its largest annual loss since the 2008 financial crisis, due to high restructuring costs and significant capital outflows.
Despite these challenges, Credit Suisse remains ambitious. The bank hopes to return to profitability by 2024 and has announced that it will improve its financial reporting audit procedures. However, the question remains whether Credit Suisse will be able to restore customer and regulator confidence after the recent setbacks.
Credit Suisse receives billions in support
In a recent development, it now appears that the bank is receiving support from the Swiss central bank. Credit Suisse will receive a maximum of 50 billion Swiss franc from the country’s central bank to stay afloat. Investors reacted positively to the central bank’s intervention and Credit Suisse shares initially rose more than 40% on the stock exchange.
The bank has been struggling for months with customers who walk away and this week the bank announced that there are errors in the annual reports of recent years. To allay concerns, Switzerland’s central bank is now stepping in with extra money for Credit Suisse, totaling up to 50 billion.