The Federal Reserve and the Federal Deposit Insurance Corp. (FDIC) identified two deficiencies the 2021 resolution plan submitted by Credit Suisse and a shortcoming in the plan laid out by BNP Paribas, the regulators said Friday.
Credit Suisse has until May 31 to submit a revised living will that addresses governance weaknesses in the bank’s U.S. operations, the regulators said. The living will — a roadmap to resolve the bank quickly if it fails or falls into bankruptcy or distress — lacks detail and necessary information, indicating the bank may not have given the plan “appropriate internal review and coordination” before it was submitted, the Fed and FDIC said.
The regulators are giving the bank until July 2024 to show it has remediated weaknesses in cash flow forecasting. Credit Suisse last month warned of a $1.6 billion loss in the fourth quarter — hardly the first quarterly loss the bank has telegraphed this year as it recovers from the Greensill and Archegos scandals.
Credit Suisse clients withdrew $88.3 billion from the bank between Sept. 30 and Nov. 11 — during which time the bank announced a far-reaching retooling.
The Swiss bank is “committed to addressing the issues raised within the required time frame,” it said in a statement seen by Bloomberg.
“The bank has taken, and continues to take, significant steps to enhance its resilience, including investments in controls, processes and technology,” Credit Suisse said, according to Reuters.
Additionally, the Fed and FDIC are giving BNP Paribas until July 2024 to submit a living will that adequately describes how securities repurchase agreement activity — such as daily trading and settlement, oversight and risk management — would remain uninterrupted in the bank’s U.S. operations.
A shortcoming is less severe than a deficiency, but the regulators made clear, in a letter to the bank last week, that the weakness would become a deficiency in their eyes if it received no further attention. BNP Paribas’ 2021 living will did not incorporate feedback the regulators suggested on the bank’s 2018 resolution plan.
BNP Paribas declined to comment to Bloomberg and did not immediately comment to Reuters.
The foreign banks are not the only institutions the Fed and FDIC saw falling short in their living wills. The regulators last month gave Citi until Jan. 31 to submit a “mapping document” aimed at resolving weaknesses related to data quality and data management concerns previously identified in an October 2020 enforcement action.
