Credit Suisse agrees to pay $2.815bn; these settlements, net of existing provisions, will result in an after-tax charge of CHF 1.598bn to be booked in the second quarter of 2014
Credit Suisse’s Look-through Basel III CET1 ratio would have been 9.3% at the end of Q1 in 20114 had this charge been applied at that time; Credit Suisse expects to exceed 10% by end-2014.
The settlement includes a guilty plea entered into by Credit Suisse’s Swiss banking entity, Credit Suisse.
The resolution of this matter was coordinated with its lead global regulators, and Credit Suisse expects no impact on its licenses, nor any material impact on its operational or business capabilities.
Credit Suisse has announced a comprehensive and final settlement regarding all outstanding matters relating to the former cross-border private banking business with U.S. clients.
Brady Dougan, CEO of Credit Suisse, said: 'We deeply regret the past misconduct that led to this settlement. The US cross-border matter represented the most significant and longstanding regulatory and litigation issue for Credit Suisse. Having this matter fully resolved is an important step forward for us. We have seen no material impact on our business resulting from the heightened public attention on this issue in the past several weeks. We want to thank our clients and employees for their support as we continued to work through this matter and brought it to a conclusion. We can now focus on the future and give our full attention to executing our strategy'.
On financial impact, capital position and dividend policy, he added: “The settlement will reduce our second quarter net income by CHF 1.598bn. If the charge arising from the settlement had been applied at the end of the first quarter 2014, our Look-through Basel III CET1 ratio would have been 9.3%, rather than 10.0%. We intend to reduce our risk-weighted assets to at or below the level of end 2013 as well as take other capital actions, including the sale of surplus real estate and other non-core assets. These measures alone should be sufficient to return our Look-through Basel III CET1 ratio to 10% by year-end 2014. Furthermore, once this 10% CET1 ratio has been achieved and while continuing to accrete capital towards our 11% long-term target, we intend to return approximately half our earnings to shareholders through our annual distributions.”
The final settlement, totaling $2.815bn (CHF 2,510 million), is comprised of the following components:
- $2bn for the U.S. Department of Justice (includin $196m for the U.S. Securities and Exchange Commission as previously announced in February 2014). One third is allocated to the U.S. Internal Revenue Service.
- $715m for the New York State Department of Financial Services
- $100m for the Board of Governors of the Federal Reserve System
In prior quarters, Credit Suisse had taken litigation provisions totalling CHF 892m related to this matter. As a result, the pre-tax impact of the final settlement in the second quarter 2014 will be CHF 1.618bn and the after-tax impact will be CHF 1.598bn.
Credit Suisse AG entered a guilty plea to one count of conspiracy to assist U.S. customers in presenting false income tax returns to the U.S. Internal Revenue Service in violation of Title 18, U.S. Code section 371 in connection with the former Swiss-based cross border private banking business.