Raiffeisen CEO Patrik Gisel is in the crosshairs over the bank's purchase of a major stake in derivatives boutique Leonteq, according to a recently-released report.
Management at Raiffeisen during the tenure of former CEO Pierin Vincenz and his deputy, Patrik Gisel, who currently runs the Swiss bank, reportedly overstepped boundaries and incorrectly reported shareholders's equity, according to Swiss weekly «SonntagsZeitung» (in German, behind paywall). The newspaper said it had seen excerpts of a report on Raiffeisen compiled by regulator Finma.
The Swiss regulator accused Raiffeisen's board of near-total failure in taming Vincenz, who was last month released from custody after his arrest in February amid an investigation into alleged side deals during his time at the bank. The board's behavior under now former chairman Johannes Rueegg-Stuerm is far from healthy fitness and probity standards, Finma said.
400 Mln Sfr Loan
CEO Vincenz and Gisel, his deputy until 2015, overreached massively in their dealings with structured products boutique Leonteq and Jan Schoch, its co-founder and former CEO.
Raiffeisen extended a 400 million Swiss franc ($403.7 milliom) line of credit to Leonteq, while also granting Schoch a personal loan of 45 million francs – collateralized with Leonteq shares.
The Leonteq stake as well as the loans formed a concentration risk that Raiffeisen should have notified the regulator of, according to the «SonntagsZeitung». Raiffeisen's management under CEO Vincenz neglected to do so.
Capital Errors
When the value of Leonteq's stock plummeted mid-2015, Schoch's loan was no longer covered by the collateral. Raiffeisen should have, but didn't, begin building reserves against a potential default. Finma also criticized Raiffeisen for incorrectly reporting its capital as a result, the paper reported.
Raiffeisen top executives also overstepped when selling the bank's stake in Investnet to Vincenz in 2015, the year he stepped down as CEO. The sale was budgeted as a «miscellaneous» item on the board's meeting agenda, preventing directors from preparing at all. The 1.5 million franc sale price remained unquestioned, and the deal went ahead in October of the same year after Vincenz had handed over the CEO job to Gisel.
No Contract for Investnet
The newspaper also reports that Raiffeisen's board should have been informed of a loan to Vincenz to buy the stake after the banker's wife, Nadja Ceregato, was promoted to top management. The deal was carried out without a written contract – presumably a lapse on Gisel's part.
A spokeswoman for Raiffeisen said the Vincenz loan was approved by a so-called credit board, and that CEO Gisel and top management weren't involved in the process. She said that the Leonteq and Schoch loans had been misinterpreted, as the two had not been viewed as binding counterparties at the time of the loan.
Finma's report focuses on the role of Raiffeisen's board and ex-CEO Vincenz – neither management nor CEO Gisel were probed. The bank itself is conducting an extensive internal investigation under Swiss banking heavyweight Bruno Gehrig.
