FRANKFURT/HONG KONG, Feb 14 (Reuters) - A U.S. investigation into whether Credit Suisse hired referrals from government agencies in Asia in exchange for business poses another reputational hurdle for CEO Tidjane Thiam as the Swiss bank enters the final stretch of a three-year turnaround plan.
Credit Suisse said on Wednesday that it was in contact with the U.S. Department of Justice and the U.S. Securities and Exchange Commission (SEC) about its hiring in Asia because of potential violation of U.S. foreign corruption law.
The revelation comes just a week after Credit Suisse terminated a publicly traded product betting on future stock index swings after its value plunged during a market rout.
On Wednesday, as the bank announced its third consecutive annual loss, its chief executive played down the fallout from that product’s collapse.
“It worked well for a long time until it didn‘t. Which is generally what happens in markets,” Thiam said, noting the prospectus made clear the product was not for amateurs.
He conceded, however, that he could not predict whether law suits would result.
These events, combined with activist investor pressure, have put the bank’s image in focus.
“This is the year when they have to prove that it is working,” said Andreas Venditti, an analyst at Vontonbel, commenting on Thiam’s efforts to make the bank profitable.
Credit Suisse did not identify which country or countries the Asia hiring probe is focused on. Asia became a focal point for Thiam shortly after he joined in the middle of 2015.
Several of Credit Suisse’s rivals have in recent years faced scrutiny over their hiring, in particular of the children of important Chinese officials, known as “princelings”.
It was a practice that became common over the past two decades as banks scrambled to build “guanxi” – connections, or mutual obligations - with important Chinese officials.
Helman Sitohang, Credit Suisse’s CEO for Asia Pacific, said: “We have decided to put up the disclosure, but ... the only thing I can say (is) ... that we are cooperating with the authorities on that.”
In 2016, JPMorgan paid $264 million to U.S. authorities to resolve allegations it hired the relatives of Chinese officials to win banking deals.
While personal connections have long been a way of doing business in much of Asia, the scrutiny from U.S. regulators ensured the issue became increasingly sensitive in recent years.
Additional reporting by Sumeet Chatterjee in Hong Kong and Brenna Hughes Neghaiwi in Zurich. Editing by Jane Merriman