Finance

Credit Suisse says it has made changes to sidestep another Greensill-type disaster

Credit Suisse said on 4 April that it has made changes to the way it operates to avoid a situation similar to the one it faced when Greensill Capital collapsed, but that it won’t publish its investigation into the issue due to pending litigation.

Answering questions posed by the Ethos Foundation and other shareholders ahead of its annual general meeting, the Swiss lender said it has to enforce claims against insurers and debtors of the Greensill-linked funds, which will lead to proceedings during which investigation reports shouldn’t be made public.

The litigation to enforce the claims might take around five years, it said.

Credit Suisse said the changes it made to its business after the collapse of Greensill included making its asset-management business a separate unit managed by an executive board member. This directly links the unit to the executive board, increases transparency provided to the board, and indicates stronger oversight of the unit, the bank said.

Within its asset-management division, Credit Suisse said it has optimised structures, including streamlining its governance and changing the approval process for new financial products. The bank said an internal audit made no negative findings about the new product development process that the supply-chain finance funds went through before they were launched.

READ FCA fines GAM £9.1m over Greensill conflicts

However, the bank said violations of its policies did take place. When two of the supply-chain finance funds were close to closure due to lack of liquidity in 2020, SoftBank agreed to step in with an investment, and required Credit Suisse to sign a side letter committing to buy notes for the funds only through Greensill in the future, which violated the bank’s requirement to treat investors equally. The bank said that as soon as it became aware of this, it launched an investigation, cancelled the letter and disciplined the employees responsible.

“The review of the entire Greensill matter as of March 2021 showed that individual managers and employees could have averted the reputational damage and economic failure if they had conducted themselves in prior years more appropriately,” it said.

In the aftermath of the collapse of Greensill, Credit Suisse fired 10 employees over the issue, it said.

Credit Suisse said its chief risk officer and its board didn’t know Greensill had difficulties finding a new auditor as part of its aborted October 2020 initial public offering plans and that they first learned of indications of a default by Greensill on 22 February 2021.

READ Credit Suisse reshuffles board after turbulent year

Regarding a liquidity problem faced by the funds in spring 2020, Credit Suisse said the problem wasn’t directly related to Greensill, but was rather due to the market situation during the early days of the coronavirus pandemic, when many investors sold fund units at a large scale and tried to increase their cash holdings.

Write to Cristina Roca at [email protected]

This article was published by Dow Jones Newswires

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