As the world reels from the shock demise of Credit Suisse, attention is now turning to the bank’s surprising link with an Australian billionaire.
In March 2021, Greensill Capital – a supply chain finance company founded in 2011 by Bundaberg-born watermelon farmer-turned rich lister Lex Greensill – spectacularly collapsed, making headlines across the globe.
As the company’s fate hung in the balance, Credit Suisse, which helped bankroll Greensill Capital, froze billions of dollars of funding.
Reports later emerged that Greensill Capital essentially waited until the last minute to inform its financial backer that it had no insurance for nearly $6 billion worth of company assets, and Credit Suisse has been roundly condemned for taking such risks with the firm in the first place.
Swiss financial regulator FINMA concluded that the bank “seriously breached its supervisory obligations” and ordered “remedial measures.”
In fact, an analysis by the Swiss Financial Market Supervisory Authority FINMA released in February discovered that Credit Suisse had “little knowledge and control” over some of its dealings with Greensill Capital, and some experts are convinced Credit Suisse’s troubles began with its exposure to the firm.
“The bank used employees who were themselves responsible for the business relationship with Greensill and were therefore not independent to deal with critical questions or warnings,” the report states.
“Credit Suisse even repeatedly asked Lex Greensill himself and relied on answers in his own statements. For these reasons, the bank made partly false and overly positive statements.”
It found Credit Suisse had failed in its duty to “adequately identify, limit and monitor risks in the context of the business relationship with Lex Greensill over a number of years”.
Mr Greensill, who grew up on Australia’s largest sweet potato farm, was made a Commander of the Order of the British Empire (CBE) by then-Prince Charles in 2017 for services to business, and dominated Aussie rich lists in the years leading up to his company’s ruin.
UBS takes over troubled Credit Suisse
On Monday, news broke that fellow Swiss bank UBS would take over its embattled rival for a three billion Swiss francs ($A4.84bn) after intense negotiations were held over the weekend.
The deal – which was described by Switzerland’s SonntagsZeitung newspaper as “the merger of the century” – was inked after the 166-year-old institution found itself teetering on the brink of collapse following a share price bloodbath which was triggered by several reasons, including the discovery of “material weakness” in the institution’s financial reporting and the refusal of its biggest shareholder to support it by buying even more shares.
The crisis sent shockwaves across the entire banking sector, given Credit Suisse was one of dozens of global banks deemed too big to fail, leaving around 17,000 internal jobs on the line, as well as tens of thousands of positions outside of the banking industry.
Cheeky note found in Sydney
One little note spotted in a Sydney office managed to perfectly summarise the nightmare – in the most Aussie way possible.
As Credit Suisse workers turned up for work at their office in Sydney’s Gateway Building, they were greeted by a cheeky post-it note covering the firm’s sign on Level 30, replacing the Credit Suisse logo with “UBS”.
Meanwhile, chairman Axel Lehmann and CEO Ulrich Koerner said in a note to staff that it was essentially a case of business as usual despite the recent chaos.
“We know that many of you will have been following the intense media coverage over the past 48 hours on the future of Credit Suisse and appreciate the enormous uncertainty and stress that this has caused,” the note reads.
UBS stressed that crisis talks were still ongoing and urged employees not to talk business with their new colleagues.
“Please remember that, until this deal closes, Credit Suisse is still our competitor and we cannot discuss business matters with their employees or take any action that could be interpreted as a step toward the merging of business.”
“Please note that there is no immediate impact on our clients and on our day-to-day working operations.
“Our branches and global offices will remain open, and all colleagues are expected to and should continue to come to work.”
Credit Suisse’s history of scandals
Archegos
Just four weeks after the Greensill collapse, Credit Suisse was rocked by the implosion of US hedge fund Archegos, which cost the bank more than $5 billion.
Mozambique loans
In October 2021, the bank was fined $475 million by US and British authorities after it was caught up in a bribery scandal in Mozambique involving loans to state-owned companies.
The credits, granted between 2013 and 2016, were supposed to finance maritime surveillance, fishing and shipyard projects, but were partly diverted for bribes.
The bank agreed with the British authorities to cancel the $200 million owed by the southeast African country, which was plunged into a serious financial crisis.
Covid rule breach
Former Lloyds Banking Group chief Antonio Horta-Osorio was brought in as Credit Suisse chairman in April 2021, pledging to put better risk management at the heart of its culture.
Less than nine months later, he resigned after it emerged he had violated Switzerland’s Covid quarantine rules.
‘Suisse secrets’
A media investigation published in February 2022, dubbed “Suisse Secrets”, alleged that the bank had held billions of dollars of dirty money for decades.
The probe, coordinated by the Organized Crime and Corruption Reporting Project, said leaked information on more than 18,000 bank accounts dating back to the 1940s showed Credit Suisse held more than $8 billion in the accounts of criminals, dictators and rights abusers.
The bank rejected the findings, saying they were “based on partial, inaccurate, or selective information taken out of context”.
Bermuda trial
At the end of March 2022, a Bermuda judge ruled that former Georgian prime minister Bidzina Ivanishvili had suffered a loss of $553 million due to failures by Credit Suisse Life Bermuda, a Credit Suisse affiliate, to fulfil its fiduciary duty.
The case stemmed from the actions of Patrice Lescaudron, a former star banker at Credit Suisse sentenced by Swiss authorities to five years in prison in 2018 on charges of fraud and forgery. Lescaudron took his own life in 2020.
The court found that the Credit Suisse affiliate “was prioritising the revenues Mr Lescaudron generated for Credit Suisse over the interests of its clients”.
Bulgarian cocaine network
In June 2022, Credit Suisse was slapped with a $2 million fine in a money laundering case linked to a Bulgarian cocaine network.
Switzerland’s Federal Criminal Court ruled that the bank had failed to take steps to prevent money laundering by the criminal organisation, deeming it guilty of breaching its corporate responsibility in a case dating back to 2007 and 2008.
Settling old disputes
In October 2022, Credit Suisse said it would pay $495 million to settle a row with the US state of New Jersey over mortgage-backed securities dating back to the 2008 financial crisis.
In France that same month, it agreed to pay 238 million euros to avoid prosecution on money laundering and tax fraud charges brought in 2016 over undeclared accounts held by French nationals.
‘Material weaknesses’
Credit Suisse was forced to postpone its annual report, which had been scheduled to be published last week, after a last-minute call from the US Securities and Exchange Commission over revisions made to cash-flow statements for 2019 and 2020.
When it finally released the report on Tuesday, it acknowledged “material weaknesses” in its internal controls.
Following fears of contagion from the collapse of two US banks, comments from Credit Suisse’s main shareholder Wednesday that it would not invest more money in the bank sparked market panic.
– With AFP