£6m fine puts hole in Credit Suisse

Not a great day for the gnomes of Zurich: Credit Suisse has just been fined almost £6m by the Financial Services Authority for exposing its UK customers to ‘unacceptable risks’ by failing to assess a structured capital risk product (‘Scarp’ to its friends) correctly. It’s not the first time the bank has fallen foul of the FSA, either: two years ago, it paid out £1.75m after it was found to have inadequate controls in place to meet its transaction reporting obligations. Meanwhile, the other troubled Swiss bank, UBS, has reported surprisingly buoyant third-quarter figures…  

Credit Suisse UK apparently sold more than £1bn worth of Scarps (which could lead to customers losing all or part of the original amount they invest) between January 2007 and December 2009. But, according to the FSA, the bank failed to have the right processes in place to assess customers’ attitudes to risk, didn’t look into whether or not Scarps were reasonable for customers, and didn’t put enough effort into ensuring its staff were giving customers the right advice. Clearly, the bank realised it was in the wrong: it was given a 30% reduction on the fine for agreeing to an early-stage settlement with the FSA.

Still, £6m is pocket money compared with the sort of cash UBS was expected to lose after its little rogue trading incident. The bank had warned that it could make a loss after it uncovered 1.8bn Swiss francs (£1.3bn) worth of dodgy deals allegedly made by Kweku Adoboli last month. Adoboli now faces two charges of false accounting and two charges of fraud over the course of a three-year stint.

But, in what will surely be hailed as a triumph of expectation management, the bank has reported a third-quarter net profit of 1bn francs – admittedly quite a bit lower than the 1.6bn francs it made this time last year, but identical to the 1bn francs it made during the previous quarter. Impressive stuff. Its interim CEO, Sergio Ermotti (CEO Oswald Gruebel resigned following the scandal last month) even seems reasonably confident about the outlook for the bank, saying that despite shaky markets, the future for the bank is ‘unquestionably solid’.

There was a hint that things might not be quite as straightforward as all that, though, when UBS chief financial officer, Tom Naratil, refused to comment on whether there will be any more job cuts at the bank. Having already made 3,500 cuts – more than 5% of its total workforce – that could have an unpleasant impact on morale. Time to stop obsessing over the colour of its employees’ socks and start focusing on making some cash, wethinks…