Page 1 of 2

The bank's top lawyer proactively tackles the bank's numerous scandals and legal cases. But can it really afford all of them?

Markus Diethelm seems to be chalking up the points right now. The former top lawyer for UBS, who took the same job at Switzerland's second-largest bank just this past June, announced a big breakthrough in a legacy case left over from the 2008 financial crisis on Monday. 

As finews.com previously reported, Credit Suisse agreed to a one-time payment of $495 million to settle claims in full related to the now toxic residential mortgage-backed securities, a case that had been hanging over the bank's head for nearly a decade.

Surprising Confession

It was another step by Diethelm to unclog all the legal cases facing the bank. Before him, Romeo Cerutti, his predecessor, and former chairman Urs Rohner, seemingly made it a habit to categorically reject any legal issues that came their way. That resulted in a towering legacy of cases that have resulted in any number of recent court defeats, significantly impairing the bank's ongoing business.

In September, there was even a surprising turn of events in Singapore when a bank trust subsidiary admitted in court that it did not inform former billionaire client and ex-Georgian Prime Minister Bidzina Ivanishvili about unauthorized transfers from his accounts. 

The confession was highly surprising in and of itself and is another example of the new direction the bank is taking under Diethelm, who personally was in the city-state for three weeks while the case was going on. Under his leadership, the bank is ostensibly prepared to make significant admissions to draw lines under legal issues that have remained unresolved for years.

Poison Pill

That is a logical course of action given the situation that the bank finds itself in. It posted a loss in the last three quarters, and it won't be able to start afresh if it doesn't manage to put all its past scandals to bed. Any announcement of a new strategy, as is expected on 27 October, might potentially be overshadowed by significant, remaining legacy issues.

That is also why investors have kept their fingers away from Credit Suisse, prompting its shares to fall by half since the start of the year. The question now is whether the bank can afford Diethelm's more proactive approach given that analysts estimate capital shortfalls between now and 2024, without including the legal cases, at between $4- and $9- billion dollars. 

The sum being paid out for the RBMS case is also no trifling matter. On top of that, Ivanishvili is asking for $1.27 billion in damages in Singapore after a court in Bermuda already awarded him and the other plaintiffs about $600 million, a judgment that Credit Suisse subsequently appealed against. But there are many other cases still out there.

1. Australia