The Credit Suisse spy­ing de­ba­cle is not about to go away

The es­pi­onage scan­dal haunts Switzer­land’s sec­ond big­gest bank, re­ports Lucy Bur­ton

The Daily Telegraph - Business - - Business -

The mes­sage was sup­posed to be sim­ple. Fol­low­ing a ma­jor scan­dal that read like some­thing straight out of a spy thriller, Switzer­land’s sec­ond big­gest bank Credit Suisse was back to man­ag­ing money for the world’s wealthy. But as chief ex­ec­u­tive Thomas Gottstein was re­lay­ing this mes­sage at a fi­nan­cial con­fer­ence in Zurich last week, an un­wel­come an­nounce­ment came from Switzer­land’s fi­nan­cial reg­u­la­tor. The watch­dog had ramped up its probe into the bank over the es­pi­onage af­fair by launch­ing en­force­ment pro­ceed­ings. A year af­ter an em­ployee was chased through the streets of Zurich by de­tec­tives, the saga has re­fused to go away.

The con­tin­ued at­ten­tion on Credit Suisse’s es­pi­onage scan­dal is an un­wel­come dis­trac­tion for a busi­ness push­ing to main­tain its lead­ing po­si­tion in the se­cre­tive world of man­ag­ing billionair­es’ money, where dis­cre­tion is ev­ery­thing.

Swiss reg­u­la­tor Finma will now dig deeper into two spy­ing in­ci­dents that have en­gulfed the bank­ing world, search­ing for po­ten­tial vi­o­la­tions and aim­ing to find out how Credit Suisse doc­u­mented these episodes. But

‘Some think that a Bri­tish banker who had to deal with one of the sec­tor’s worst IT melt­downs in re­cent his­tory could have the an­swers’

ques­tions will re­main unan­swered for sev­eral months – last year the av­er­age length of time it took for the watch­dog’s en­force­ment pro­ceed­ings to close was just un­der 11 months.

De­spite for­mer chief Tid­jane Thiam re­sign­ing this year and the bank con­duct­ing an in­ter­nal in­ves­ti­ga­tion to get to the bot­tom of things (the re­sults were never pub­lished in full), the de­ba­cle is still some way from blow­ing over.

Some think that a Bri­tish banker who had to deal with one of the sec­tor’s worst IT melt­downs in re­cent his­tory could have the an­swers. One se­nior City ad­viser said the bank’s board ap­point­ment of TSB chair­man Richard Med­dings in April is “ex­cel­lent for them in try­ing to move on from this” given his ex­pe­ri­ence of cri­sis. He was the fi­nance chief at Stan­dard Char­tered dur­ing the fi­nan­cial crash, served on the board of Deutsche Bank when it paid more than $7bn (£5.3bn) to set­tle US al­le­ga­tions of mis-sell­ing toxic mort­gages and be­came chair­man of TSB just months be­fore it was hit with an IT glitch that lasted weeks and left al­most 2m peo­ple with­out ac­cess to their bank ac­count and 1,300 los­ing money through fraud at­tacks (370 for­mer cus­tomers were also wrongly told that they had died).

Fu­ri­ous MPs re­named TSB the “Truly Sham­bolic Bank” af­ter the fi­asco, but Med­dings pushed on.

“It’s not whether you get knocked down, it’s whether you get up,” he told this paper, quot­ing leg­endary Amer­i­can foot­ball coach Vince Lom­bardi, as he tried to re­build faith in the chal­lenger bank.

Pick­ing it­self back up and restor­ing con­fi­dence is ex­actly what Credit Suisse’s in­vestors will have hoped it would have done by now. The spy­ing scan­dal has not only been deeply em­bar­rass­ing for the bank but has raised wider ques­tions about gov­er­nance and a toxic cul­ture where it looks as though staff have to watch their back and where the board seems to have lost con­trol. Bosses in­clud­ing Thiam were cleared of hav­ing any knowl­edge of the botched spy op­er­a­tion fol­low­ing an in­ter­nal probe which pinned the blame on Thiam’s key lieu­tenant, for­mer op­er­at­ing chief Pierre-Olivier Bouée, who quit last year af­ter an in­ter­nal in­ves­ti­ga­tion con­cluded that he is­sued the sur­veil­lance in or­der to pro­tect the in­ter­ests of the bank with­out the board’s knowl­edge.

The bank in­sisted the ini­tial spy­ing case which took place last Septem­ber was an un­usual one-off in­ci­dent. How­ever the cri­sis es­ca­lated months later when it was forced to ad­mit that an­other se­nior ex­ec­u­tive was spied on.

The drama first erupted a year ago when Credit Suisse’s wealth man­age­ment boss Iqbal Khan, who had re­cently re­signed, no­ticed that he was be­ing fol­lowed while go­ing out for din­ner in Zurich with his wife. The lengths gone to check-up on its star banker af­ter he quit for arch-ri­val UBS, keep­ing watch to make sure he didn’t try and lure over any clients or staff (there was never any ev­i­dence that he did), un­der­lines just how com­pet­i­tive the Swiss bank­ing mar­ket is.

In a fur­ther twist he also hap­pened to be Thiam’s neigh­bour and the pair had fallen out months ear­lier in a row over some trees. The re­la­tion­ship be­tween the neigh­bours had soured to the point that Khan, who helped boost prof­its in the bank’s wealth arm by 80pc, called it quits.

Soon af­ter the Khan af­fair the bank’s rep­u­ta­tion was dam­aged even fur­ther. The bank had in­sisted that Khan’s ex­pe­ri­ence was an iso­lated one, but three months later it was forced to ad­mit that its ex-hu­man re­sources chief Peter Go­erke was also fol­lowed by pri­vate eyes for sev­eral days.

For­mer Credit Suisse chief ex­ec­u­tive Tid­jane Thiam, who re­signed ear­lier this year

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.