The bank has been hit by two financial scandals (Archegos Capital and Greensill) in recent week which have raised questions on its governance and risk management processes. As a shareholder and representative of numerous Swiss pension funds, Ethos has sent to the board of directors questions in relation with these recent cases.
Credit Suisse's 2021 annual general meeting (AGM) is being held this Friday morning behind closed doors, as all general meetings in these times of a pandemic. While shareholders can follow it live on the bank's website, they will not be able to intervene and ask questions directly to the board of directors, which Ethos strongly regrets. Ethos believes that this practice, currently followed by many Swiss companies, goes against article 697 of the Swiss Code of Obligations which guarantees shareholders this fundamental right.
This is even more important for the 2021 AGM of Credit Suisse. The bank has been hit by two financial scandals (Archegos Capital and Greensill) in recent week which have raised questions on its governance and risk management processes. A charge of CHF 4.4 billion has already been recorded in the first quarter of 2021 in relation to the failure of the hedge fund Archegos Capital and more losses are unfortunately to be expected. These two cases have forced the bank to, once again, strengthen its core capital and raise more than CHF 1.8 billion of capital.
In recent years, the Ethos Foundation has repeatedly pointed out the governance problems of the bank and questioned the benefits of maintaining particularly risky and capital-intensive investment banking activities. Ethos is therefore delighted that a new chairman is proposed for election at this AGM to objectively review the strategy and risk management of the bank. As a shareholder and representative of numerous Swiss pension funds, Ethos sent the outgoing chairman of the board of directors, Mr. Urs Rohner, as well as his designated replacement, Mr. António Horta-Osório, the following questions in relation with recent cases:
- Will the investigations initiated by the board of directors and entrusted to external parties in the context of the Archegos and Greensill cases also examine to what extent the members of the board of directors have a share of responsibility for these two matters, and, if necessary, lead to a reflection on the risk management and supervision on the part of the board?
- Can the board of directors guarantee that the detailed results of these two investigations will be made public?
- Has the board of directors planned to review the composition of its risk committee after this 2021 AGM following the major shortcomings in risk management that led to the recent Archegos and Greensill matters?
- What is the bank’s current exposure to prime brokerage activities implicated in the Archegos matter?
- What percentage of the risk weighted assets represent prime brokerage activities? What is the share of the bank's own core equity allocated to these activities?
- What part of the group's total variable remuneration for 2020 was allocated to "prime brokerage" activities and what amount was ultimately not paid ("claw back") due to the Archegos matter?
Ethos expects the board of directors to provide answers to these questions at the AGM this Friday morning. The reputation of the bank with its shareholders depends on it.
In parallel, Ethos joined forces with other investors to ask Credit Suisse to publish a precise timetable to phase out its activities (loans, advice, subscriptions and investments) with companies active in the coal industry. In 2020, Credit Suisse took a first step in this direction by committing not to finance or provide underwriting services to companies with a coal share of revenue greater than 25%, unless that company has a "credible transition strategy to diversify away from thermal coal and where, in addition, the transaction proceeds make a material contribution to this transition".