The rogue trading scandal at UBS revealed fundamental flaws in the Swiss bank’s risk management operations.
It also put pressure on Swiss regulators to push for change, and it spooked Credit Suisse.
Small changes have already taken place at Credit Suisse, according to one employee at the firm, and spillover effects might hit other unrelated banks, too, resulting in tighter oversight, stricter rules, and more red tape.
One employee at Credit Suisse told us he’s been instructed to watch out for “suspicious activity.”
He specified two things as the type of suspicious activity he was told to look out for:
- Someone taking “weird calls,” (ie, going off in a conference room to take a call)
- A broker not providing a recap after a trade.
If the first happens, employees should report the incident. If the latter happens, the trade with that broker should be suspended.
We’ve heard from another source inside the bank that this was not an “official” mandate from the top at Credit Suisse.
And what’s happening isn’t at all unusual. It’s common practice at firms to have seminars and training programs to reiterate the importance of these risk-management and internal control protocols. All banks with trading operations are likely concerned and working to double-check their own practices in the wake of the scandal.
However it’s evidence that Credit Suisse is cracking down, and asking its employees to help, even if it means reporting a colleague.
Of course the effects will be the worst at UBS, where only months ago Oswald Gruebel said “I’m pretty convinced we have one of the best risk managements in the industry.“
But while UBS weighs the changes it needs to make in order to reassure clients and investors it has adequate risk management controls, there is also pressure on Swiss bank regulators to push for change. They are currently pushing for more regulations on its banks, including higher capital requirements. There was even a call for a ban on investment banking. It narrowly failed to get enough support. (More details here.)
Thus the effects of the UBS scandal might be felt second-most at Credit Suisse, the other big Swiss bank.
Credit Suisse declined to comment for this article.
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