Credit Suisse finds material weaknesses in financial reporting says outflows

Credit Suisse finds ‘material weaknesses’ in financial reporting, says outflows ‘not yet reversed’

  • The ailing Swiss lender released its annual report, which was due for release last Thursday but was ultimately delayed by a call from the US Securities and Exchange Commission.
  • After completing talks with US regulators, Credit Suisse confirmed its 2022 results announced on Feb. 9, which reported a full-year net loss of 7.3 billion Swiss francs ($8 billion).

The Credit Suisse Group logo in Davos, Switzerland, on Monday, January 16, 2023.

Bloomberg | Bloomberg | Getty Images

Credit Suisse on Tuesday said its net asset outflows had declined but “not yet reversed,” and said it had identified “material weaknesses” in its 2022 and 2021 financial reporting processes.

The ailing Swiss lender released its annual report, scheduled for last Thursday, which was delayed by a late call from the US Securities and Exchange Commission (SEC).

That discussion related to a “technical assessment of previously disclosed revisions to the consolidated cash flow statements for the years ended December 31, 2020 and 2019 and related controls.”

In Tuesday’s annual report, Credit Suisse said it had identified “certain material weaknesses in our internal control over financial reporting” for 2021 and 2022.

These issues related to a “failure to develop and maintain an effective risk assessment process to identify and analyze the risk of material misstatement” and various deficiencies in internal controls and communications.

Despite this, the bank said it was able to confirm that its financial statements for the years in question are “fairly present in all material respects, [its] consolidated financial position.”

Credit Suisse confirmed its 2022 results announced on Feb. 9, which showed a full-year net loss of 7.3 billion Swiss francs ($8 billion).

liquidity risk

In late 2022, the bank announced that it had experienced “significantly higher cash withdrawals, non-renewals of maturing term deposits and net asset outflows at levels that significantly exceeded rates incurred in the third quarter of 2022.”

Credit Suisse recorded more than 110 billion Swiss francs in client withdrawals in the fourth quarter as it continued to be plagued by a series of scandals, legacy risks and compliance breaches.

“These outflows stabilized at much lower levels but had not reversed as of the date of this report. These outflows caused us to utilize partial liquidity buffers at the group and legal entity level and we remained subject to certain regulatory requirements at the legal entity level. “

Credit Suisse acknowledged that these circumstances “have exacerbated and may continue to exacerbate” liquidity risks. The reduction in assets under management is expected to result in lower net interest income and recurring commissions and fees, which in turn will impact the Bank’s capital position objectives.

“Failure to reverse these outflows and restore our assets under management and deposits could have a material adverse impact on our results of operations and financial condition,” the report said.

Credit Suisse reiterated that it has taken “decisive action” on legacy assets as part of its ongoing massive strategic overhaul, which is expected to result in another “significant” financial loss in 2023.

The bank’s board of directors collectively waived a bonus for the first time in over 15 years, the annual report confirms, taking home combined fixed compensation of 32.2 million Swiss francs.