By Noele Illien and Stefania Spezzati
ZURICH (RockedBuzz via Reuters) – Credit Suisse said in its 2022 annual report that the bank identified “substantial weaknesses” in its internal controls over financial reporting and has yet to stem client outflows.
“As of December 31, 2022, the Group’s internal control over financial reporting was not effective and, for the same reasons, management reassessed and reached the same conclusion regarding December 31, 2021,” the document released on Tuesday reads. .
Auditor PricewaterhouseCoopers (PwC) included an “unfavorable opinion” in the report about the effectiveness of the bank’s internal controls on its reporting, but its statements “fairly present, in all material respects” the bank’s financial position since 2020 to 2022.
Swiss regulator FINMA said it is clear the bank needs to have proper oversight processes in place.
“When control weaknesses are identified, we expect a prompt remediation of the control weaknesses,” he told RockedBuzz via Reuters. “We are in contact with the bank on this matter.”
The reporting shortcomings come as Credit Suisse is trying to recover from a series of scandals that have sapped investor and client confidence. Client outflows in the fourth quarter soared to more than 110 billion Swiss francs ($120 billion).
The bank said on Tuesday that “outflows (had) stabilized at much lower levels but had not yet reversed.”
Reiterating what the bank had said in its last two sets of quarterly results, the annual report detailed how the outflows led Credit Suisse “to partially draw on liquidity reserves at the group and legal entity level” and the bank stated that it “fell below certain legal entities regulatory level requirements.”
Banks must meet certain liquidity buffer requirements to meet potential customer demands for their cash.
When asked in a phone call to analysts on Feb. 9 whether the liquidity breaches had been resolved, Chief Financial Officer Dixit Joshi replied, “yes, absolutely.”
Shares of the bank fell more than 3% before trimming losses to fall 1.55% as of 11:52 GMT.
The cost of Credit Suisse debt default insurance has risen to a record over 520 basis points, according to S&P Global Market Intelligence.
Banks around the world were engulfed in a sell-off sparked by the collapse of two US lenders last week which forced regulators to step in and guarantee deposits.
FINMA said on Monday it was trying to identify any contagion risks for the country’s banks and insurers following the failures of US banks.
Scheduled for release last week, the annual report was delayed following a request from the US Securities and Exchange Commission (SEC), which had raised questions about the bank’s previous financial statements.
Credit Suisse said the SEC had called it on previous revisions to its 2019 and 2020 consolidated financial statements.
The bank said Tuesday it was working on a “remediation plan” and would implement “robust controls to ensure all non-monetary items are appropriately classified within the consolidated financial statement.”
($1 = 0.9129 Swiss francs)
(Reporting by Noele Illien and Stefania Spezzati; editing by Sonali Paul and Jason Neely)