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Presiding over the firm’s Annual General Meeting (AGM) in April 2022 — his first as Credit Suisse Board Chair — Axel Lehmann acknowledged that, “Within the organisation as a whole, we have failed too often to anticipate material risks in good time in order to counter them proactively and to prevent them.”1 A year later, at the firm’s April 2023 AGM — his last as Board Chair — Lehmann would apologize to shareholders for the collapse of Credit Suisse.
“We stand here today in a situation that no one could have anticipated,” Lehmann said. Perhaps. But the firm’s long-stretch of conduct scandals and risk management failures was well known to Lehmann. When he had accepted the chairmanship, he reminded shareholders, he had done so knowing, “We needed a comprehensive strategic and cultural transformation.” Alas, “We failed to stem the impact of legacy scandals, and counter negative headlines with positive facts in order to rebuild the lost confidence,” Lehmann explained.
[W]e have failed too often to anticipate material risks in good time in order to counter them proactively and to prevent them. - Axel Lehmann
A new compliance chief had been announced in November last year,2 while former CEO Tidjane Thiam sought to defend his record of culture change initiatives. “Cultural issues can’t be resolved overnight,” Thiam said.3 But past problems continued to bring new headlines in December, adding to doubts about the bank's risk management capabilities.4 And in February this year, even as some staff chafed at new risk control measures management had sought to implement,5 Swiss banking regulator FINMA concluded an investigation into Credit Suisse’s risk management failings in connection with Greensill Capital and reported finding that there had been a “serious breach of Swiss supervisory law.”6
Founded in 1856, Credit Suisse ranked at number 15 on the Financial Stability Board’s November 2022 list of Global Systemically Important Banks.7 Much has been made of the firm’s capital woes. In October last year, Credit Suisse was focused on shoring up its capital base,8 with significant commitment from the Saudi National Bank,9 and was looking to cut costs and to make strategic divestitures, to include a retreat from Wall Street.10 Nevertheless, by close of year, many felt the firm had reached a make-or-break moment.11
In November, Credit Suisse announced $1.6 billion in expected fourth-quarter losses amidst customer outflows that approached $90 billion, or 6% of total assets.12 When results were reported in February this year, the firm announced 2022 Q4 losses of $1.5 billion, its share value having cratered by nearly 70% year-on-year.13 In mid-March, as turmoil in the US banking sector began filling the headlines, Credit Suisse announced that it had found material weaknesses in its internal controls for financial reporting. “Management did not design and maintain an effective risk assessment process to identify and analyse the risk of material misstatements in its financial statements,” its annual report read.14
Hoping to restore confidence, after the Saudi National Bank indicated unwillingness to up its stake in the firm, in mid-March the Swiss Central Bank announced readiness to provide Credit Suisse with a liquidity backstop.15 Shares rallied briefly,16 but by then the rout was on in earnest. And, as Václav Havel noted in 1990, “History has accelerated.”
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“An Epidemic of Loneliness”
The fourth wave
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The costs of misconduct
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Tribulations, and trials
Audit Quality Indicators
Shared interest and collective action
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