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Westlake Legal Group > Credit Suisse Group AG

Spying Scandal at Credit Suisse Leads to Top Executive’s Resignation

When Tidjane Thiam joined Credit Suisse as chief executive in 2015, he was charged with turning around the Swiss bank and steadying its profit.

A drive for revenue at any cost had pushed traders at Credit Suisse to take outsized positions in risky and hard-to-sell securities. As trading conditions soured, the bank had to cut thousands of jobs.

By 2016, Mr. Thiam pivoted away from the volatile trading of its investment bank to enhance its more reliable wealth management division. Now that division has produced an unlikely, and embarrassing, corporate spy scandal.

The Swiss bank’s chief operating officer, Pierre-Olivier Bouée, resigned on Tuesday after a company board ordered an examination into his ordering the surveillance of its top wealth manager who quit to work for UBS.

Mr. Bouée could not be reached for comment.

In August, Mr. Bouée ordered the Swiss bank’s head of security services to track Iqbal Khan, its head of wealth management who was leaving after a personal disagreement with Mr. Thiam. Outside investigators were hired to follow Mr. Khan and see if he was trying to poach employees or clients in breach of his Credit Suisse contract.

But the investigation turned messy after a confrontation between Mr. Khan and a corporate spook outside a Zurich restaurant in mid-September.

Mr. Khan, who had left Credit Suisse weeks earlier, submitted a criminal complaint about the encounter, and Zurich’s public prosecutor now is investigating. The Swiss Justice Department also is looking into the death of a security expert involved in the surveillance, the prosecutor’s office said in a statement Tuesday. The office said it was examining the circumstances.

Urs Rohner, the chairman of Credit Suisse, said in a news conference Tuesday morning that the surveillance of Mr. Khan was “wrong.”

“The measure that was taken was disproportionate and did not reflect the criteria and standards by which we measure our own work,” Mr. Rohner said. He added: “The observation was wrong and inappropriate, even though the instructions were subjectively provided for the protection of our firm’s interest.”

The results of a Credit Suisse investigation into the episode, conducted by an external law firm for the board of directors, were announced on Tuesday. The board was told that the surveillance had found no evidence that Mr. Khan had tried to poach employees or clients from Credit Suisse.

The investigation also found that Mr. Thiam and other executives were not aware of the spying. Because of this, Mr. Rohner said, “we strongly reject any and all assertions made over the last days that call into question the personal and professional integrity of our C.E.O.”

The bank said on Tuesday that James B. Walker, who was chief financial officer for the United States, had been appointed to take over Mr. Bouée’s role. It also said that it had accepted the resignation of the head of global security.

After several years of putting its house in order, the bank on Tuesday faced questions about whether Mr. Thiam was properly informed about the surveillance — or what was happening under his management if he did not know that Mr. Khan was being watched.

“I don’t believe in my own mind, speaking as a board member, that that suggests that Mr. Thiam is not on top of the rest of the organization,” said John Tiner, chairman of the audit committee, during the news conference.

Mr. Rohner said there were personal differences and “heated discussions” between Mr. Khan and Mr. Thiam that ended in Mr. Kahn’s leaving, but he did not elaborate on their relationship. The investigation, he said, did not find any proof the spying was linked to animosity between the two men.

Still, Mr. Rohner apologized, saying that the results of the Credit Suisse investigation “do not change anything about the fact that the reputation of our bank has suffered in the last few days.”

Despite the revelations of the past month, Credit Suisse’s restructuring has had some positive effect on the bank. In the second quarter of this year, the bank’s net profits were 45 percent higher than the year before.

“I am aware that these events were damaging for the reputation of Credit Suisse, but also for the entire financial center of Switzerland, and for this I would like to sincerely apologize,” Mr. Rohner said.

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Fed Stress Tests Find Top Banks Are Strong, Setting Stage for Wave of Payouts

Westlake Legal Group db30-stresstests-facebookJumbo Fed Stress Tests Find Top Banks Are Strong, Setting Stage for Wave of Payouts Regulation and Deregulation of Industry Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) Deutsche Bank AG Credit Suisse Group AG Banking and Financial Institutions

The Federal Reserve said on Thursday that its annual tests of the financial strength of the 18 largest banks in the United States revealed that each had enough capital to justify paying some of it out to shareholders.

The clean bill of health is good news for big banks and their shareholders, but it could fuel concerns that federal regulators are embracing a laissez-faire approach to financial oversight.

There was one caveat to the Fed’s across-the-board thumbs-up: The central bank said it found weaknesses in how Credit Suisse was measuring potential losses, and the Fed therefore capped the amount of money the Swiss bank could return to its investors until it corrected the problem.

The Fed’s “stress tests” examine how the largest banks would fare in a severe economic downturn or a sudden shock to the global financial markets. After a two-part evaluation, banks either receive permission to return capital — via repurchasing their own shares, paying dividends or other means — or are prohibited from doing so until they fortify their capital cushions or strengthen their management.

“The results show that these firms and our financial system are resilient in normal times and under stress,” Randal K. Quarles, the Fed official in charge of supervising banks, said in a statement on Thursday.

The Fed is required by the Dodd-Frank financial-regulation law to perform regular health checks on banks. The goal is to make sure they have enough capital to withstand a repeat of the 2008 financial crisis and wouldn’t require taxpayer bailouts.

Investors are likely to cheer the results, because banks will now be able to give shareholders a cut of the record profits they have been earning. Those profits are due in part to the strong United States economy and also to the Trump administration’s 2017 tax cuts.

Within minutes of the Fed releasing the test results, the country’s four largest banks — Bank of America, Citigroup, JPMorgan Chase and Wells Fargo — announced that they could repurchase a total of about $105 billion of their own shares. The four banks also said they would increase their dividends.

Last year, Goldman Sachs and Morgan Stanley had to cap the sums they gave back to investors after the Fed said they needed more capital. Deutsche Bank, which has a large but struggling business in the United States, was the only company to fail last year’s test outright.

This year, a couple of banks squeaked by.

JPMorgan Chase had to submit adjustments to its capital payouts after the Fed found that in a severe crisis it would not have met minimum capital requirements.

Deutsche Bank passed this year, though it is still under intense scrutiny by United States and European regulators and prosecutors. The Fed said that Deutsche Bank still had more changes to make to its capital operations, but that it had passed the test because it had made significant progress on fixing its problems.

This year, for the first time since the stress tests began, the number of banks the Fed examined shrank sharply — a sign of a swing to lighter regulation under President Trump.

Instead of looking at 35 banks, as it did in 2018, the Fed this year examined only the largest 18. The change was a result of a new law that relaxed some parts of the Dodd-Frank rules. The law raised the total amount of assets a bank could hold — to $250 billion from $50 billion — before it was considered systemically important. The Fed also decided to start performing the tests once every two years instead of annually.

There were other changes that helped paint a rosier picture of the biggest banks’ strength. Banks that hold money for other banks, like State Street and Bank of New York Mellon, were able to reclassify some of their holdings to make them count toward their overall capital requirements.

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