To say the least, the measures that the Swiss Financial Market Supervisory Authority (Finma) imposed on Credit Suisse Tuesday were uncharacteristic. No fine was imposed and there was no heavy-handed mandate for an external monitor. 

Instead, the bank now has to review its 500 most important business relationships periodically for significant counterparty risks. It also has to record and document the areas of responsibility for each of its 600 highest senior executives.

Mythical Dimensions

It is likely that armies of compliance specialists will be kept busy by the mountains of records that pile up. Relationship managers and bank executives will have to think closely about the business relationships they want to enter and keep, particularly if they are held responsible in writing. Not once, but periodically.

That gives Finma's decision almost apocryphal proportions. It even sounds like the punishment of Prometheus in Ancient Greek mythology after he was bound to a rock and an eagle was sent by Zeus every day to eat his liver, only for it to regenerate overnight.

Partners and Clients

But the measures are fitting ones. They adequately capture many of the strange conflicts of interest that mark the Greensill debacle and set it apart from the other issues and crises that Switzerland's second-largest bank currently faces. The supply chain fiasco involved many different parts of the bank. Business partners were often clients, which made everything that much more complex. At first glance, there was a great deal of banking business that had little to do with fund management.

Glaring exceptions were made in the name of business, and that was something that would eventually prove fatal.

All of this is an outgrowth of the ideal of a «One Bank» which has always had its strong adherents in Swiss banking, even if they were in different periods and institutions. In practice, it means providing clients with various banking services from a single source as a way of increasing revenue. Back in 2015, ex-Credit Suisse head Tidjane Thiam became one of its strongest exponents. Under him, Switzerland's second-largest financial institution became the «entrepreneur's bank». It provided its wealth management capabilities to company owners as individuals and general banking, financial and lending services to the companies they owned.

Ideal Client?

(Image: Greensill Capital)

Taking a look at it from that perspective, Australian financier Lex Greensill (image above) must have looked ideal. As the key figure in this whole debacle, he made sure that the supply chain funds were fed a constant flow of invoices. His company was a client of the investment bank while he himself, according to the English-speaking media, was also a private banking client.

Finma puts it all in black and white in its enforcement announcement. 

«Greensill, for its part, announced to the bank that it was planning an IPO with Credit Suisse. Greensill first needed a bridging loan. The Credit Suisse risk manager responsible for the loan identified a number of risks in Greensill’s business model. He, therefore, recommended internally at the bank not to grant the loan. A senior manager overruled this recommendation.», Finma wrote.

Overruled by CRO