Switzerland's second-largest lender had raised expectations it was
putting the long-running American tax controversy behind it when it
set aside an extra half a billion dollars last week to deal with a
U.S. Department of Justice probe into its involvement in offshore
But Benjamin Lawsky, New York's financial services superintendent,
is now examining whether the bank lied to New York authorities about
creating tax shelters, raising the prospect of a new probe, a source
familiar with the matter told Reuters.
Shares in Credit Suisse dropped 2.2 percent to 28.82 Swiss francs in
Zurich on Monday as investors digested the possibility of a costly
"There is still a lot of uncertainty around all these legal issues
at Credit Suisse. Nobody can tell how much it will really cost in
the end," said Peter Stenz, portfolio manager of Swiss equities at
Swisscanto, one of the 50 largest stakeholders in Credit Suisse.
Credit Suisse has so far set aside 895 million francs ($1 billion)
to deal with tax and securities law matters in the United States,
above the $780 million Swiss rival UBS paid in 2009 to settle
charges it sheltered U.S. citizens from the taxman.
After years of stalemate as Bern and Washington clashed over a wider
tax dispute, there have been recent signs that Credit Suisse was
closing in on a deal with U.S. authorities.
In February, the bank reached a 196 million franc settlement with
the U.S. Securities and Exchange Commission in a related tax dispute
and a few days later Chief Executive Brady Dougan apologized to U.S.
senators for the bank's misconduct but blamed it on a small group of
rogue bankers and said it stopped in 2008.
While the Department of Justice has considered a
deferred-prosecution agreement that would suspend any indictment in
exchange for a large cash penalty, it is also pushing for a guilty
plea from a Credit Suisse subsidiary, according to a New York Times
report on Sunday.
The cash penalty is expected to be more than the $780 million fine
UBS paid in 2009, the newspaper said.
While the Department of Justice has been criticized in Washington
for the slow pace of its inquiry into Swiss banks, Lawsky, a former
federal prosecutor, has a track record of going his own way and
Last year, he extracted $250 million from the Bank of
Tokyo-Mitsubishi UFJ over sanction violations, far higher than the
$8.57 million the Treasury Department settled for.
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Lawsky also played hardball with Standard Chartered over sanctions
violations, threatening to revoke its state license, and stopped
working with other agencies which were also pursuing the bank.
Standard Chartered later agreed to pay New York $340 million and
settled with other agencies for $327 million.
Credit Suisse's litigation headaches come as the bank is buffeted by
a slowdown in fixed income sales and trading, putting CEO Dougan
under pressure to accelerate a pull-back from riskier areas of
investment banking that are expensive to run.
The U.S. pursuit of tax dollars sheltered in offshore accounts has
piled pressure on Swiss banks. Credit Suisse said in February it had
lost over 35 billion francs in withdrawals from western Europe, as
clients, spooked by the probe, pull out.
Amid the U.S. scrutiny, Credit Suisse, like UBS, is leaning more
heavily on its private banking franchise to compensate for the drop
in investment banking returns.
More than a dozen Swiss banks, including Credit Suisse, Julius Baer
and the Swiss arm of Britain's HSBC are under criminal investigation
in the United States while scores of smaller banks have agreed to
work with U.S. authorities to cap penalties they might face.
($1 = 0.8935 Swiss francs)
(Reporting by Silke Koltrowitz and Oliver Hirt;
by Joshua Franklin in London; writing by Carmel Crimmins; editing by Pravin Char)
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