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Investor inquisition awaits Credit Suisse chairman after scandals

·3-min read
It hasn't been smooth sailing recently for Switzerland's second largest, but its new boss intends to set a new course for Credit Suisse later this week (AFP/Fabrice COFFRINI)

Credit Suisse's new chairman is expected to face a barrage of questions this week after a series of scandals have rocked Switzerland's second-largest bank and cost investors billions.

In a brief statement issued Monday, the bank said it would host its annual investor day on Thursday, offering them a first chance to question Antonio Horta-Osorio about his strategy since taking the helm six months ago.

It could be a tough session.

Last month, the bank was slapped with nearly half-a-billion dollars in fines over its role in Mozambique's giant financial crisis, even as its investors continued to reel from the billions that evaporated in the meltdowns at financial firms Greensill and Archegos.

Amid the flurry of financial fiascos, Horta-Osorio has, since he took the reins in April, launched a review of the bank's strategy and vowed to make risk management a top priority.

The Portuguese banker, who built a solid reputation in having turned around British bank Lloyds, has, among other things expanded, the board to include two additional risk management experts.

He had given himself until the end of the year to reveal his strategic vision for Credit Suisse, but the bank said the investor day on Thursday would "provide an update" on the strategy review.

The investor meeting will follow the publication of Credit Suisse's third-quarter results, which are already known to have taken a $230-million (198-million-euro) hit in connection with the Mozambique fines.

And that is less than half of the total $475 million in fines imposed by US and British authorities on the bank last month for "fraudulently misleading investors" and violating anti-corruption law in bond offerings made to Mozambique.

The US Securities and Exchange Commission (SEC) said transactions "that raised over $1 billion were used to perpetrate a hidden debt scheme" and "pay kickbacks" to now-indicted ex-Credit Suisse investment bankers and their intermediaries, and to "bribe corrupt Mozambique government officials".

Just days after the fines were announced, the Fitch ratings agency lambasted the "serious shortcomings in Credit Suisse's corporate governance", stressing "the urgent need for the group to complete its programme to strengthen risk controls."

It cautioned that a failure to adequately address its risk management issues could negatively impact its long-term credit rating.

- Culture change -

One of Switzerland's top shareholders associations, Actares, meanwhile said the large sum of the fines "shows how serious the lack of responsibility has been until now".

"Management has promised culture change," it told AFP in an email, insisting that "it is time to see a clear signal" that the promised changes are underway.

The Mozambique scandal erupted as Credit Suisse was still feeling the aftershocks from the implosion of US hedge fund Archegos earlier this year that cost the bank some $5.5 billion.

An independent external investigation into the Archegos fiasco found a failure to manage risk effectively at the bank.

Credit Suisse has also been repaying billions of dollars to investors who placed money in funds linked to collapsed British financial firm Greensill.

An investigation into that debacle is expected to wrap up by the end of the year.

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