Credit Suisse Stock Down After Admitting Material Weaknesses In Financial Reporting
Credit Suisse Group AG’s shares were losing around 4 percent in Swiss trading as well as around 3 percent in pre-market activity on the NYSE after the banking major admitted that it has identified “material weaknesses” in its financial reporting for the years 2022 and 2021.
The development comes as the worldwide banking industry has been facing scrutiny following the failure of U.S banks Silicon Valley Bank and Signature Bank, deemed as the biggest U.S. banking failures since the 2008 financial crisis.
In its annual report 2022 released on Tuesday, the Swiss lender said its internal control over financial reporting as of December 31, 2022 and 2021 was not effective. The disclosure controls and procedures were also not effective, it said.
Credit Suisse, which initially scheduled to release its 2022 annual report last Thursday, delayed the publication following a late call from the U.S. Securities and Exchange Commission or SEC.
The company then said the SEC call was related to certain open SEC comments about the 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.
In the annual report, the bank now said, “The material weaknesses that have been identified relate to the failure to design and maintain an effective risk assessment process to identify and analyze the risk of material misstatements in its financial statements and the failure to design and maintain effective monitoring activities…”
The company said the material weakness resulted in the revisions contained in its previously issued consolidated financial statements for the three years ended December 31, 2021.
Despite these material weaknesses, the bank confirmed that its consolidated financial statements as included in the report fairly present, in all material respects, its consolidated financial condition as of December 31, 2022 and 2021.
Credit Suisse disclosed that in 2022 it experienced significantly higher withdrawals of cash deposits, non-renewal of maturing time deposits and net asset outflows.
According to the bank, these outflows stabilized to much lower levels but had not yet reversed as of the date of this report. These outflows led the firm to partially utilize liquidity buffers at the Group and legal entity level, and it fell below certain legal entity-level regulatory requirements.
Silicon Valley Bank had a dramatic collapse on last Friday after many clients withdrew their money, expecting that bank may fail in the near future.
Further, Signature Bank was closed by the U.S. regulators following a significant deposit outflows related to contagion from Silicon Valley Bank’s failure, among others.
In Switzerland, Credit Suisse shares were trading at 2.16 francs, down 4.30 percent.
In pre-market activity on the NYSE, the shares were losing around 2.4 percent to trade at $2.48.
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