Tag: credit suisse
Too Big To Punish

Too Big To Punish

A few months ago, in a press conference about the felony conviction of Credit Suisse, Attorney General Eric Holder said, “This case shows that no financial institution, no matter its size or global reach, is above the law.”

Yet, earlier this month, the Obama administration announced its proposal to waive some of the possible sanctions against Credit Suisse. The little-noticed waiver, which was outlined in the Federal Register, comes amid criticism that the Obama administration has gone too easy on major financial institutions that break the law.

In its announcement outlining the waiver, the Department of Labor notes that Credit Suisse “operated an illegal cross-border banking business that knowingly and willfully aided and assisted thousands of U.S. clients in opening and maintaining undeclared accounts” and in “using sham entities” to hide money.

Under existing Department of Labor rules, the conviction could prevent Credit Suisse from being designated a Qualified Professional Asset Manager. That designation exempts firms from other federal laws, giving them the special status required to do business with many pension funds. The Obama administration’s is proposing to waive those anti-criminal sanctions against Credit Suisse, thereby allowing Credit Suisse to get the QPAM designation needed to continue its pension business.

The waiver proposal follows a larger pattern. In June, Bloomberg News reported that federal prosecutors have successfully pushed U.S. government agencies to allow Credit Suisse to avoid many regulatory sanctions that could have accompanied its criminal conviction.

“The New York Fed said last month that the bank can continue handling government securities as a so-called primary dealer,” reported the news service. “The SEC let the firm continue as an investment advisor while the agency considers a permanent waiver.”

Pensions and Investments magazine has reported that despite Department of Labor assurances of tough enforcement of its sanctions against convicted financial firms, the agency has “granted waivers for all 23 firms seeking individual waivers since 1997.”

Critics say that by using such maneuvers, the Obama administration is effectively cementing a “too big to punish” doctrine. That criticism intensified in 2012 and 2013, when top Justice Department officials defended the administration’s reluctance to prosecute banks by publicly declaring that the government considers the potential economic impact of such prosecutions. Those declarations echoed an earlier memo by Holder, which stated that officials could take into account “collateral consequences” when deciding whether to prosecute major corporations.

Why is the Obama administration reducing sanctions on Credit Suisse? The administration says it is a decision based on pragmatism, not favoritism.

The Federal Register announcement, for instance, notes that Credit Suisse has assets of nearly $1 trillion, and argues that if the anti-criminal provisions were enforced, the bank would lose its ability to offer investment products to pension funds. The announcement also argues that the Credit Suisse entities that specifically conduct pension business “are independent of” and “not influenced by Credit Suisse AG’s management and business activities.”

What the administration did not mention, of course, is that according to data compiled by the Sunlight Foundation, employees of Credit Suisse have given President Obama’s campaigns more than $376,000. That’s particularly relevant in light of an April study of SEC data from London Business School professor Maria M. Correia. That analysis showed that “politically connected firms are on average less likely to be involved in … enforcement action and face lower penalties if they are prosecuted.”

Whatever the reason for the proposed waiver, one thing is for sure: The move contradicts the claim that “no financial institution, no matter its size or global reach, is above the law.” Indeed, the Obama administration’s waiver proposal suggests exactly the opposite.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

AFP Photo/Fabrice Coffrini

Want more economic news and analysis? Sign up for our daily email newsletter!

Credit Suisse Posts Heavy Loss After U.S. Tax Fine

Credit Suisse Posts Heavy Loss After U.S. Tax Fine

Zurich (AFP) – Credit Suisse posted an unexpectedly big net second-quarter loss on Tuesday as a huge U.S. tax evasion fine sent it deep into the red.

The bank revealed a negative figure of 700 million Swiss francs (576 million euros, $778 million).

The Swiss banking giant paid a $2.6 billion settlement to U.S. authorities in May over tax evasion charges.

The bank stood accused of helping thousands of wealthy Americans hide money in offshore accounts to escape the U.S. revenue service.

The bank’s quarterly losses exceeded the forecasts of analysts who had expected them to average 598 million Swiss francs. Last year Credit Suisse posted a 1.04-billion-franc profit over the same period.

The U.S. fine heavily impacted the giant’s private banking and wealth management divisions, which racked up pre-tax losses of 749 million Swiss francs, Credit Suisse said in a statement.

This was offset by corporate banking activities which generated a pre-tax profit of 752 million Swiss francs, on a par with the same period last year but down nine percent since the first quarter.

The bank remained upbeat about its performance so far this year.

“Our reported results for the second quarter and the first half of 2014 were impacted by the resolution of our most significant legacy litigation issue,” said Brady Dougan, chief executive of Credit Suisse since 2007.

“During the quarter, we continued to see good momentum with clients, while at the same time making further progress in winding-down our non-strategic units,” the American said in a statement.

“Our strategic results were solid, demonstrating the resilience of our business model notwithstanding subdued client trading activity in certain areas which impacted both Private Banking and Wealth Management and Investment Banking,” he added.

Dougan underlined that Credit Suisse had generated net new assets of 11.8 billion Swiss francs, driven by growth in the Asia-Pacific and Swiss markets, which are both key for the giant.

That more than offset asset outflows of 2.9 billion Swiss francs related to cross-border business in western Europe, he said.

Analysts at investment firm Jefferies underlined that net new money was strong at Credit Suisse, saying that it “should alleviate fears of reputational damage post the U.S. guilty plea”.

“The mix, however, was poor, with disappointing Private Banking trends and higher-than-expected costs,” they said.

Credit Suisse, Switzerland’s second-biggest bank, embarked on a massive restructuring in 2012, echoing a move by its top-ranked rival UBS.

Under that programme, Credit Suisse aims to save 4.4 billion Swiss francs by the end of 2015.

Credit Suisse has also decided to quit the commodities trading business, in which it was not a major player in any case.

“The restructuring of our macro business, including the exit from commodities trading, is expected to drive further capital, leverage and expense reductions,” said Dougan.

Amid international pressure on Swiss banks to make amends for past practices of allowing and even helping foreign nationals hide assets, the sector has been undergoing a seismic shift.

Switzerland recently agreed to phase out its long tradition of banking secrecy over the next two years, caving to pressure from foreign governments which since the global financial crisis struck in 2008 have become increasingly eager to lay their hands on such hidden assets.

It reluctantly said it would open the way to automatic exchange of banking data, dropping a long-held conviction that accounts should be taxed but that all information about them should remain confidential.

AFP Photo/Fabrice Coffrini

U.S. In Another Probe Of Credit Suisse: Report

U.S. In Another Probe Of Credit Suisse: Report

New York (AFP) – Credit Suisse is under investigation in the United States to determine if it allowed traders use its network for improper transactions, the Wall Street Journal reported Thursday.

The Financial Industry Regulatory Authority, Wall Street’s self-regulator, is looking into the activities of several traders who may have used sophisticated computer programs improperly, for example to manipulate the market by duping other investors in making trades, the paper said.

The newspaper quoted people familiar with the probe.

Credit Suisse may have granted traders access to its trading networks and its “dark pool,” which the journal described as “a private, lightly regulated trading venue.”

The bank has given some traders two months to find another trading partner, the paper said.

The probe is the latest headache for Switzerland’s second-largest bank. On Monday it pleaded guilty to helping Americans dodge taxes and agreed to pay a fine of $2.6 billion.

©afp.com / Fabrice Coffrini

Goldman Sachs Fears Risks If Rivals Plead Guilty

Goldman Sachs Fears Risks If Rivals Plead Guilty

New York (AFP) – The head of U.S. bank Goldman Sachs has warned that guilty pleas from rivals BNP Paribas and Credit Suisse, under legal proceedings in the United States, could hurt the financial system.

The two European banks, under probes for violating U.S. sanctions and abetting tax evasion, are potentially facing very heavy fines that could reach billions of dollars.

U.S. authorities are urging the banks to plead guilty and have threatened criminal prosecution, which could lead to the revocation of their licenses — potentially forcing other banks to determine whether to continue doing business with them.

Goldman Sachs chief Lloyd Blankfein, asked about the issue on the sidelines of the bank’s annual shareholder meeting Friday in Texas, said it would be difficult to stop doing business with the two European banks.

Given the many ties between the world’s banks, the resolution of the case could affect internal credit relationships within the financial system, Blankfein said, according to comments reported by The Wall Street Journal.

“It becomes a very weighty decision to cut someone off, and we wouldn’t do it lightly.”

He said the impact “depends on what the consequences of the guilty pleas are.”

According to the Financial Times, Blankfein also warned that “for us to not deal with someone would be a further risk to the system.”

Accepting a guilty plea — which no bank has done in the United States in two decades — could have serious consequences for the operations of the two banks, exposing them to damages claims.

In similar cases, U.S. banks have been fined heavily but not forced to plea guilty.

BNP Paribas is accused of having violated U.S. sanctions against Cuba, Iran and Sudan between 2002 and 2009. The bank’s chief executive Jean-Laurent Bonnafe came to the U.S. to make his bank’s case last week.

Credit Suisse is facing prosecution for its part in helping rich Americans hide their assets to avoid U.S. taxes.

Photo: Saul Loeb via AFP