Unsurprisingly, the first complaints once morest Credit Suisse are filed and they are on the other side of the Atlantic. The Archyde.com agency has indeed revealed that American shareholders launched collective action on Thursday once morest the banking establishment which fails to restore confidence, its action having closed on Friday down 8.01%, at 1.86 francs. .
The plaintiffs accuse the second Swiss bank of not having announced that it continued to face significant withdrawals of funds from its customers and that its internal controls were not sufficient to carry out financial reporting. The bank’s current leaders, managing director Ulrich Körner and chairman Axel Lehmann, are also in their sights.
What chance of success do they have? The policeman of the Swiss financial markets is perhaps the best placed to know. Indeed, Finma was also interested in possible shortcomings in this area. It sought to know to what extent the President of Credit Suisse and other senior executives of the establishment knew that customers continued to withdraw their money, while its president had publicly affirmed in December that the ebbs had dried up.
Read also: Recovery, dismantling, merger… Four scenarios for the future of Credit Suisse
A usual procedure
Hiding information that impacts share value can be problematic for a listed company. If the plaintiffs were to win their case, which is far from certain, the bank but also its managers might be required to pay damages to investors who sold or bought securities during the period in question: from 1 December 2022 to February 17 in the case of the class action launched.
In the United States, silence is golden: the law provides for penalties if misleading, imprecise or erroneous information has been given but does not punish what has not been said. Swiss law is more active since any element likely to have an influence on the share price is supposed to be disclosed.
Finma, which decided a week ago to give up investigating Axel Lehmann’s remarks, obviously judged that he had not made a mistake in this regard. And, notes an expert who prefers to remain anonymous, the financial market supervisory authority has certainly had access to more information than the shareholders who feel aggrieved. The triggering of the collective action brought by the American firm Levi & Korsinskycustomary of the fact, will however oblige Credit Suisse to also provide it to the representatives of the plaintiffs to prove or demonstrate its good faith.
Also read: Finma does not investigate the words of the president of Credit Suisse
Expensive, long and complicated procedures
As for the predecessors of the current leaders, they are in the state beyond the reach of justice. Even if the commitments in the British company Greensill and the hedge fund Archegos, at the origin of the financial setbacks of the Swiss bank, were taken under their reign, they benefit from the discharges which were voted during the general meetings of shareholders, along with their salaries. Last year, a special audit requested by the Ethos foundation on the bankruptcy of Greensill did not reach the number of votes necessary to be carried out.
Such an audit would perhaps have made it possible to see more clearly the responsibilities in this case because only new elements might justify legal action. However, it would be necessary to be able to prove that there was a willful breach, gross negligence or lack of organization since, as is recalled on the occasion of each economic failure, incompetence is not punishable.
In Switzerland, the painful failure of the trial of the former leaders of the airline Swissair has marked the spirits. It ended in 2007 with a general acquittal of the architects of the strategy that had led the group to bankruptcy in 2001. In 2010, the Board of Directors of UBS had given up filing a complaint once morest the former directors of the bank which had to be saved by the Confederation and the SNB in 2008. He had estimated that the chances of success were too low and that legal proceedings would be long, expensive and would harm the image of the establishment.
Finally read: Four questions to understand why Credit Suisse is faltering