Credit Suisse in the sights of US lawmakers

American elected officials are once again interested in Credit Suisse. Monday evening, Thomas Gottstein, managing director of the bank, received a letter from two members of the American Congress. The subject of the missive? Learn more about how Switzerland’s second-largest bank has complied with sanctions on Russia since invading Ukraine, the the wall street journal.

At the heart of the process, a controversy launched by an article in the FinancialTimes on March 2, when the United States, the European Union and Switzerland had just imposed sanctions against Russian oligarchs. The daily revealed that Credit Suisse had asked investors to destroy documents related to financial arrangements. Through the latter, the bank offered loans to oligarchs in exchange for pledging yachts, private jets or real estate. Loans themselves provided by hedge funds (alternative funds) or other investors, in order for Credit Suisse to reduce its risks.

Defaults related to sanctions in 2017 and 2018

To justify its request, the bank evoked a leak in the media. the FinancialTimes had indeed already written about the mechanics of these unusual loans, after having been able to consult a presentation to investors. This showed in particular that a third of the defaults on loans on yachts and private jets in 2017 and 2018 came from American sanctions against Russian oligarchs.

Problem, the request from Credit Suisse arrived the same week as the American and European sanctions and when it appeared more and more likely that the Federal Council would follow. The day after the publication of the article, on March 3, the Councilor to the States Carlo Sommaruga, who chairs the Legal Affairs Commission, denounced the bank to the Public Ministry of the Confederation. “Shocked from a moral point of view”, the Geneva socialist considered that the request to erase information was “intended to prevent the implementation of the sanctions decreed by both the European Union and by Switzerland”.

Read also: Credit Suisse denounced to the Federal Prosecutor’s Office

On the American side, the revelations “raised important concerns” of the same order, according to the letter signed by two Democratic representatives, Carolyn Maloney and Stephen Lynch, who respectively chair the House of Representatives Government Action Oversight Committee and the national security subcommittee. They worry in particular that this could mean that “the bank wants to hide information about the fact that participants in the transaction are trying to evade sanctions”.

They want to know the list of investors who participated in the operation, as well as documents relating to the due diligence (verification procedures) of the bank and the assets concerned. They also request all communications and documents relating to instructions to destroy information related to the transaction, as well as all communications with the holders of the affected assets. The whole thing, since January 2017, is expected by April 11, according to the letter.

Statistics, not names

How will the bank respond to this? “I don’t think the bank can provide the names,” said a connoisseur of the financial center. Even if the banks theoretically insert derogations in their general conditions to banking secrecy, the damage to the image would be very significant.

Contacted, the main interested party refers to a press release issued on March 3, explaining in particular that “the request addressed to non-participating investors to delete or return the documents relating to this transaction was, as is market practice, stipulated in the non-disclosure agreement”. It added that “the documents shared with investors did not contain client names and/or asset identification characteristics”, but “portfolio statistics and performance models in relation to the underlying balance sheet positions “. Finally, Credit Suisse asserted that there was “absolutely no connection with the recent introduction of additional sanctions, which are fully respected by the bank.”

Also read: Credit Suisse and UBS have limited the risks linked to Russia

In the meantime, the bank has also communicated on its situation in Russia and assured that it has “minimum total exposure in our wealth management division” to those affected by international sanctions. On Monday, she still decided not to accept any new business in Russia and to reduce the sails there, without however leaving the country.

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