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Reading: Credit Suisse finds ‘material weaknesses’ in financial reporting controls
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Jaraa'id > Business > Credit Suisse finds ‘material weaknesses’ in financial reporting controls
Business

Credit Suisse finds ‘material weaknesses’ in financial reporting controls

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Last updated: 2023/03/14 at 8:54 AM
News Room Published March 14, 2023
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Credit Suisse said it had identified “material weaknesses” in its internal controls over financial reporting, the latest blow to a bank battling to revive its fortunes.

In its annual report on Tuesday, Credit Suisse said “management did not design and maintain an effective risk assessment process to identify and analyse the risk of material misstatements in its financial statements”.

The bank said its full year 2022 results — when it reported its biggest annual loss since the financial crisis — were unaffected.

Credit Suisse had been forced to push back the publication of the annual report from last week after receiving a last-minute call from the US Securities and Exchange Commission relating to cash flow statements going back three years, which it described as “technical”.

The findings come at a difficult juncture for the bank that has lurched from crisis to crisis in recent years, resulting in heavy losses. Its share price fell 4 per cent in early trading on Tuesday to SFr2.166, leaving it down over 20 per cent this year and more than 80 per cent over the past two years.

In a separate statement on Tuesday, PwC, the bank’s auditor, said it had identified flaws in the bank’s internal control system.

It said that “management did not design and maintain effective controls over the completeness and the classification and presentation of non-cash items in the consolidated statements of cash flows”. 

The bank said its management team was developing a remediation plan to address the weakness, which included “strengthening the risk and control frameworks, and which will build on the significant attention that management has devoted to controls to date”. 

“Additionally, we will implement robust controls to ensure that all non-cash items are classified appropriately within the consolidated statement of cash flows,” the group added.

Last year, Credit Suisse replaced its longtime chief financial officer David Mathers with former Deutsche Bank treasurer Dixit Joshi. All but one of the bank’s executive board has been replaced in the past two years.

Alongside the disclosure of the weakness in controls, Credit Suisse said that chair Axel Lehmann would waive his SFr1.5mn ($1.6mn) annual fee for 2022 in light of the group’s poor financial performance. Since becoming chair just over a year ago, the group’s shares have plunged 75 per cent.

Last week Finma, the Swiss regulator, said it had closed its investigation into comments made by Lehmann about customer outflows, saying there are no sufficient grounds for supervisory proceedings.

The bank also confirmed a plan to grant senior managers equity in its CS First Boston investment banking arm, which is due to be spun off as part of a radical restructuring designed to return the bank to profit. Staff could own up to 20 per cent of shares in the venture, which would vest over three years after a planned IPO.

Video: Credit Suisse: what next for the crisis-hit bank? | FT Film

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News Room March 14, 2023
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