The backlog of new wealthy client accounts at Credit Suisse in Asia causes them difficulty

In order to open accounts in Asia, hundreds of new wealthy clients are currently waiting. This backlog is causing some of these clients to switch to competitors and is negatively affecting staff morale in a department crucial to the bank's efforts to turn around its financial situation.

The difficulty Credit Suisse is facing in Asia stems from the bank's introduction of stricter source of wealth (SoW) corroboration standards for new clients in November. This move was made in response to a string of scandals that put the bank in the crosshairs of regulators and resulted in a multibillion-dollar trading loss.

According to people familiar with the situation, by February the new measures had generated a waiting list of more than 600 people as understaffed "know-your-customer" and SoW teams struggled to handle the increased workload. Additionally, staff in the region also face limited flexibility when working from home.

It now takes six to eight months to check and approve for regular wealthy clients. Even those with deposits of $10 to $15 million and hundreds of millions of dollars in assets on the bank's priority list must wait three to four months, the sources claimed.

The backlog of customers highlights the conundrum Credit Suisse is facing as it attempts to boost profits by taking on more risk in the wake of several high-profile scandals without furthering its reputational damage or facing regulatory penalties for skimping on compliance.

The key to Credit Suisse's efforts to boost revenues and reallocate its earnings toward wealth management is private banking in Asia. Private banking has emerged as one of the most lucrative industries as the number of wealthy families in the region, particularly in mainland China, India, and Indonesia, is on the rise.

At a presentation to investors last week, Francesco De Ferrari, head of wealth management globally, stated that Asia-Pacific had the highest expected growth rate of any region, at 10%, but he cautioned that recent months' challenges had included rising interest rates and the market downturn.

Credit Suisse managers lowered the SoW corroboration threshold to 50% in May for new clients it deemed "low-risk," with the intention of verifying the remaining 50% of their wealth within 12 months, according to the people. This was done to speed up their ability to take on clients.

The majority of those in better-regulated jurisdictions with trustworthy documentation, like Singapore and Hong Kong, are designated as low-risk. The people added that there are worries internally about some candidates not being thoroughly vetted as a result of the decision.

Even though the backlog was just over 500 by late spring, some clients quit the process out of frustration and went to competitors instead, particularly Wall Street lenders like JPMorgan, which is aggressively expanding and stealing customers from the area, according to the people.

Credit Suisse released a statement saying, "our bankers are continuing to bring in new clients to the bank.  When onboarding these new accounts, it’s very important to us that we fully meet all the regulatory requirement," the company said, adding that it was examining the IT and personnel required to do this.

Staff have resisted Benjamin Cavalli's restrictions on flexible working since he took over as head of wealth management in Asia Pacific last November, prompting the race to clear the backlog.

Working from the office is the new "business as usual," as stated in a memo sent by Cavalli and his top managers in May. This memo requested that all front-office and product specialist staff in the region work from the office five days a week, when Covid-19 restrictions permit.

Employees have noted that the directive conflicts with the insistence made by Credit Suisse Chief Executive Thomas Gottstein in May that a full-time return to the office was "unrealistic and not what employees want," according to people familiar with the situation.

One person with knowledge of the situation warned that the harsh approach could backfire, saying that skilled relationship managers are both your greatest asset and the biggest barrier to growth in Asia. "We are now in a world where we need to demonstrate flexibility."

The Asia-Pacific region had adopted a "flexible working regime," the bank said in a statement, but "staff are encouraged to engage with their manager to agree on an appropriate level of flexibility."

In 2021, Credit Suisse will hire 80 relationship managers for wealth management in Asia, and another 30 will be added this year, bringing the total to 710. This is less than the approximately 850 UBS employees in the area, though.

By fLEXI tEAM