ZURICH: Credit Suisse acknowledged on Tuesday (Mar 14) “material weaknesses” in its internal controls over financial reporting as the bank released its annual report, which was delayed following queries from US regulators regarding its books.
Credit Suisse was supposed to publish its annual report last week but it postponed the release after a last-minute call from the US Securities and Exchange Commission over revisions made to cash-flow statements for 2019 and 2020.
“As of Dec 31, 2022, the Group’s internal control over financial reporting was not effective, and for the same reasons, management has reassessed and has reached the same conclusion regarding Dec 31, 2021,” the scandal-hit Swiss bank said in the filing published on Tuesday.
Auditor PricewaterhouseCoopers (PwC) in the report included an “adverse opinion” on the effectiveness of the bank’s internal controls over its reporting but its statements “present fairly, in all material respects” the financial position of the bank in 2020 through 2022.
Swiss regulator FINMA said it is clear that the bank must have appropriate control processes in place.
“When weaknesses in the controls are identified, we expect timely remediation of the control weaknesses,” it told Reuters. “We are in contact with the bank on this matter.”
The bank said on Tuesday it is working on a “remediation plan” and will implement “robust controls to ensure that all non-cash items are classified appropriately within the consolidated statement of cash flows”.
Credit Suisse has endured a barrage of problems in recent years, including its exposure to the implosions of US asset manager Archegos and UK firm Greensill in 2021.
Shares of Switzerland’s second-biggest bank hit a new low on Monday on contagion fears following the collapse of Silicon Valley Bank (SVB) and a second US regional lender.
Its stock price sank by as much as 5 per cent on Tuesday following the release of the report, but it rebounded by more than 1 per cent later in the day amid a global market rebound.
FINMA on Monday said it was seeking to identify any potential contagion risks for the country’s banks and insurers following the US bank failures.
Credit Suisse has lost about 80 per cent of its market value since it was rocked by the bankruptcy of Greensill in March 2021, the first in a cascade of scandals.
“Credit Suisse is always in the emergency room when it comes to any market crisis, and today’s news really intensifies the worries,” said IG analyst Chris Beauchamp.
“It’s a bank that can never seem to get its house in order.”
“A POSITIVE SIGN”
The bank booked a net loss of 7.3 billion Swiss francs (US$7.8 billion) for the 2022 financial year.
That came against a backdrop of massive withdrawals of funds by its clients, including in the wealth management sector – one of the activities on which the bank intends to refocus as part of a major restructuring plan.
The annual report said these outflows “had not yet reversed” as of March.
But Credit Suisse chief executive Ulrich Koerner told Bloomberg Television that the bank attracted funds this week following SVB’s collapse.
“We got inflows yesterday, which is a positive sign I would say,” he said.
Koerner, who took over in August with the daunting task of revitalising the group, said the lender was “absolutely doing the right thing” by overhauling the bank but “it takes some time to get through”.
“Nobody is pleased by the share price development but we manage what we can manage, and this is the execution of our plan,” he said.
“We said it’s a three-year transformation and you can’t come after two months: ‘Why is not everything done?'”