Topline
Credit Suisse on Tuesday disclosed it found “material weaknesses” in its financial reporting processes for 2021 and 2022 that could have resulted in “misstatements” of financial results, marking the latest blow to the crisis-ridden bank as it released its delayed 2022 annual report.
Credit Suisse on Tuesday disclosed it found “material weaknesses” in its financial reporting … [+]
Key Facts
The weaknesses include the lack of effective risk assessment to identify misstatements in its financial reporting and a lack of effective oversight.
The bank said its management is developing a “remediation plan” to address the problem but noted its annual report “fairly presents” its consolidated financial condition for the two years.
The lender also disclosed that PricewaterhouseCoopers, which audited its financial statement for 2022, also issued “an adverse opinion” on the bank’s “internal control over financial reporting.”
Credit Suisse was forced to delay the release of its annual report by a week after it received a last minute call from the Securities and Exchange Commission with questions about its cash-flow statements from 2019 and 2020, which have now been resolved.
The bank—which in February reported its biggest annual loss since the 2008 financial crisis—also disclosed that its customer withdrawals, which surged in the early part of the fourth quarter last year, have “stabilized to much lower levels” but have “not yet reversed.”
In addition to the disclosure, the crisis stricken investment bank also said its chair, Axel Lehmann, has agreed to forego a $1.65 million (CHF 1.5 million) annual payment usually meant for top board members.
News Peg
The investment bank’s stocks were down more than 4% in morning trading after the annual report was released. Credit Suisse shares, along with other banking stocks, has been hit by a global rout triggered by the collapse of Silicon Valley Bank last week. The Swiss lender’s turmoil, however, predates the SVB collapse and its stock value has plummeted by more than 80% since March 2021.
Key Background
Credit Suisse has been at the center of a litany of scandals over the past few years. The investment bank reported a $1.72 billion loss in 2021 due to the bankruptcy of fund partner Greensill Capital and took another $5.5 billion hit from the collapse of hedge fund Archegos Capital. Following Russia’s invasion of Ukraine last year, the lender came under the scrutiny of the U.S. House oversight committee over its handling of information about assets linked to Russian oligarchs. In July, the bank announced it was replacing its CEO and undertaking a “comprehensive strategic review,” amid mounting losses. Social media rumors in October about Credit Suisse’s financial health triggered some panic in the markets, along with a wave of withdrawals from customers. The company reported losses of $8 billion (CHF 7.3 billion) in 2022.
Further Reading
Credit Suisse Finds ‘Material’ Control Lapses After SEC Prompt (Bloomberg)
Credit Suisse says outflows have stabilized but not reversed (Reuters)
Source: https://www.forbes.com/sites/siladityaray/2023/03/14/credit-suisse-finds-material-weaknesses-in-its-financial-reporting-process/