Credit Suisse finds ‘material weakness’ in financial reporting

Credit Suisse chair Axel Lehmann. Photograph: Krisztian Bocsi/Bloomberg

Marion Halftermeyer

March 14 2023 07:26 AM

Credit Suisse Group AG said it had identified "material weaknesses" in its reporting procedures for the financial years 2022 and 2021 and is adopting a remediation plan.

For the two years "the group's internal control over financial reporting was not effective," Credit Suisse said in its annual report released Tuesday. "Management has also accordingly concluded that our disclosure controls and procedures were not effective."

The bank was forced to delay the release of its annual report from last week after US regulators raised last-minute queries.

Credit Suisse didn't specify whether those had been resolved.

The material weaknesses identified relate to the failure to design and maintain effective risk assessments in its financial statements, the bank said.

"PwC, the independent registered public accounting firm that audited the financial statements for the year ended December 31, 2022, included in this annual report, has issued an adverse opinion on the effectiveness of the Group's internal control over financial reporting as of December 31, 2022," Credit Suisse said.

Chairman Axel Lehmann is also forgoing a payment of 1.5 million Swiss francs ($1.6m) for his first full year on the job, as the bank reported its worst annual performance since the 2008 financial crisis.

Lehmann, who took up the role in January 2022, will not receive the standard fee that's usually paid on top of board members' salaries, according to the bank's compensation report.

Lehmann was allocated compensation of 3 million francs for the period from April 2022 to April 2023, and plans to propose taking lower total pay of 3.8 million francs for the following pay period at the annual shareholder meeting. The bank is also planning to increase the portion of the chairman's compensation that is paid in shares to 50pc from 33pc.

In waiving his fees, Lehmann mirrors executive-board members who are not receiving a bonus for last year when the lender suffered record outflows of client funds and a slump in its share price amid concerns over its restructuring plans. The bank cut its 2022 pool for all employees by about half, setting aside only 1 billion francs, down from 2 billion francs the prior year.

After a flood of departures, Credit Suisse is seeking to motivate senior staff while not angering shareholders and regulators. The bank disclosed it will make another substantial loss this year and is in the middle of a complicated restructuring that includes carving out its investment bank and selling off businesses that don't connect with its key wealth unit. It is also reducing costs by cutting 9,000 jobs.