Swiss Pressure Rises On Credit Suisse Boss Dougan After U.S. Deal
Pressure on Credit Suisse boss Brady Dougan to quit shows no signs of abating in Switzerland following this week's $2.5 billion settlement with the U.S. authorities over charges that it helped Americans evade taxes by hiding their assets in secret bank accounts. The Swiss bank's board has backed the American chief executive over the deal, under which Credit Suisse pleaded guilty to criminal charges but held onto its New York license and its legally protected client data.
Credit Suisse Chief Executive Brady Dougan is under pressure from lawmakers to resign over the Swiss bank's role in helping wealthy Americans dodge taxes, a legal headache that could cost the bank as much as $1.6 billion to resolve.Switzerland's left-wing Social Democrats (SP)called for Dougan to step down now saying he and other executives represented part of the problem, as the Zurich-based lender seeks to settle the tax evasion case with U.S. authorities.
Switzerland's finance minister says her government is satisfied with the U.S. deal that will allow Credit Suisse, the nation's second-biggest bank, to put its criminal investigation behind it but notes other banks remain in the crosshairs. Finance Minister Eveline Widmer-Schlumpf says banks including the regional cantonal lenders remain in talks to resolve charges of misconduct as part of a U.S. crackdown on foreign banks believed to be helping American tax cheats. U.S.
It's a big loss for the Swiss banking giant. Seven hundred million Swiss francs in the second quarter. Much of that down to a 1.6 billion Swiss franc settlement with U.S. authorities over helping clients evade taxes. Not a only big loss, but much bigger than the forecast 580 million - and the most sizeable since the height of the financial crisis. But the other surprise: the numbers still aren't that bad, according to Andrea Williams of Royal London Asset Management.
7.77 million Swiss francs ($8.22 million) is today's Daily Digit in Europe - the pay packet of Credit Suisse CEO Brady Dougan. It's a third more than he earned in 2011 and comes at time when the bank is cutting costs and jobs and has seen its share price stall. It also places the spotlight firmly back on banker's pay. Another senior Credit Suisse executive earned more than $11 million last year, 2 million more than a year ago.
New York state's banking regulator is seeking hundreds of millions of dollars from Credit Suisse in its probe of potential tax evasion involving the Swiss bank, according to sources close to the matter, which could push an eventual settlement with U.S. authorities over $2 billion. The settlement with the New York State Department of Financial Services would be in addition to the fine that Credit Suisse is discussing with the U.S. Justice Department.
According to a report in the Financial Times, Credit Suisse is mulling a plan to spin off part of its fixed income business in the United States in order to help trim costs. The Swiss bank is considering selling a stake in its subsidiary Wake USA - an electronic market for U.S. government bonds that it started with a high-speed trading group Tower Research - citing unnamed sources familiar with the bank's thinking.
Credit Suisse is being challenged on several fronts - a first quarter drop in profit of more than a third on the year is the result. Claims it's been helping wealthy Americans hide cash from the taxman is one problem - it recently set aside an extra $120 million for legal fees as a U.S. investigation was widened. Another issue is a 21% fall in bond-trading activities. That's knocked the bank's revenue and raised questions about its strategy of sticking with fixed income.
Credit Suisse reported worse-than-expected results for the first quarter on April 16, with a slump in its investment banking operations leading to a 12% reduction in net income for the Swiss banking giant compared to the same quarter last year. The fact that the bank missed earnings expectations, despite having issued a warning last month about lower revenues for some of its business units, suggests that investors grossly underestimated the extent of the decline.