Credit Suisse Group, still reeling from significant losses tied to the 2021 collapses of Archegos Capital Management and Greensill Capital, disclosed in its annual report its internal control over financial reporting (ICFR) was “not effective” for the fiscal year ending December 2022.
The Swiss bank made the disclosure Tuesday in its 2022 annual report. The bank’s management came to the conclusion as part of a risk assessment of management practices.
The assessment found the bank “did not design and maintain an effective risk assessment process to identify and analyze the risk of material misstatements in its financial statements.”
The ICFR failures threatened to inject material misstatements into the annual financial statements of subsidiary Credit Suisse AG, per the disclosure. Steps to remedy the situation are being taken, the bank said.
“Credit Suisse Group’s board of directors and executive board are developing a remediation plan to address the material weakness … including strengthening the risk and control framework,” the bank stated. “[The plan] will build on the significant attention that management has devoted to controls to date.”
On March 8, Credit Suisse was forced to delay publication of its annual report by the U.S. Securities and Exchange Commission because of “technical assessment of previously disclosed revisions to the consolidated cash flow statements in the years ended December 31, 2020, and 2019, as well as related controls,” the bank said in a press release.
The bank’s stock price has dropped nearly 14 percent in the past five days, according to Yahoo Finance, a period that has seen the banking industry rattled as a whole by the collapse of Silicon Valley Bank.
Credit Suisse on Tuesday disclosed losses of 7.3 billion Swiss francs (U.S. $8 billion) in 2022 and said its top executives would not receive bonuses for the year.
The bank had approximately $10 billion tied up in four funds linked to Greensill, the U.K. supply chain startup that declared bankruptcy in March 2021, and lost an estimated $5.5 billion with the collapse of Archegos that same month.
Poor risk management practices by Credit Suisse and its subsidiaries were blamed by outside consultants as the primary reason the bank failed to recognize the risks posed by Archegos and Greensill and did not take steps to lessen its exposure before the losses hit.
On Feb. 28, Switzerland’s Financial Market Supervisory Authority finalized its investigation into Credit Suisse’s handling of Greensill, concluding poor risk management by Credit Suisse’s asset management company kept the Swiss bank mostly unaware of the risky nature of Greensill’s lending procedures.
Credit Suisse in October 2022 announced plans to restructure over the next three years, moving away from investment vehicles that supported Archegos and Greensill and back toward its historic specialty of wealth management. The bank hired Nita Patel as its new chief compliance officer that month.