According to Switzerland's Financial Market Supervisory Authority, poor risk management by Credit Suisse's asset management company kept the Swiss bank mostly unaware of the risky nature of lending procedures used by financier Lex Greensill that would lead to the collapse of his supply chain startup (FINMA).
From 2017 to 21, Credit Suisse's asset management company had little knowledge of and control over securitized claims made by Greensill on behalf of four Credit Suisse funds. Furthermore, FINMA stated that the bank had no knowledge of or control over insurance coverage obtained in its name for those claims.
As a result, Credit Suisse violated its supervisory requirements regarding risk management processes and was required by FINMA to implement corrective actions.
FINMA said on Tuesday that it has completed its investigation into Credit Suisse's handling of the four Greensill-related funds, each of which the bank shuttered after Greensill Capital went bankrupt in March 2021.
Around $10 billion in investor assets were invested in the four funds, with Credit Suisse taking steps to mitigate risk following the collapse of Greensill Capital, according to FINMA. Previously, the bank admitted that its risk and compliance unit failed to escalate multiple red signals.
“In its proceedings, FINMA concluded that Credit Suisse Group seriously breached its supervisory duty to adequately identify, limit, and monitor risks in the context of the business relationship with Lex Greensill over a period of years,” the regulator said in a press release. “FINMA also found serious deficiencies in the bank’s organizational structures during the period under investigation. Furthermore, it did not sufficiently fulfill its supervisory duties as an asset manager. FINMA thus concludes that there has been a serious breach of Swiss supervisory law.”
FINMA stated it started enforcement actions against four former Credit Suisse managers in connection with the bank's handling of its relationship with Greensill.
Credit Suisse altered its governance structures and tightened its control systems used to approve and monitor fund products in reaction to the collapse. According to FINMA, the bank will "periodically and comprehensively" assess its most important commercial partnerships (about 500) at the executive board level, and areas of duty of its about 600 senior managers must be listed in a document of responsibility.
Credit Suisse said in a statement Tuesday that it has "taken a series of comprehensive organisational actions" recommended by its own internal probe and FINMA.
Credit Suisse stated that it fired several senior managers and employees involved with the Greensill funds, imposed disciplinary measures on others, including clawbacks of previously granted compensation awards, and improved governance, oversight, and accountability to increase transparency and reduce risk. The bank also delegated risk management to a separate divisional risk management unit.
By fLEXI tEAM