Floundering tier 1 FX dealer’s executives brought to book over offensive behavior at Chairman’s birthday party

High jinx is one thing, but being downright offensive is absolutely another.

Credit Suisse was once a superior participant in the Tier 1 FX market making sector, being one of the global investment banking institutions that dominated alongside its peers which at the time included Citigroup, JP Morgan and Deutsche Bank.

Those days are long gone, and after a turbulent five years, the last thing Credit Suisse needs is a public image disaster, especially one that shows German speaking executives in Switzerland demonstrating disdain toward the company’s former CEO.

Credit Suisse’s chairman held a party where his friends dressed up and danced in Afro wigs. The bash to celebrate Urs Rohner’s 60th birthday, at a Zurich restaurant last November, also featured a black entertainer dressed as a cleaner who sang as he swept the floor.

As the janitor-styled singer took to the stage, Thiam excused himself and left the room with his partner in disgust. Emma Walmsley, the boss of British drugs giant Glaxosmithkline where Rohner is a non-executive director, was at Thiam’s table and followed suit.

But they were appalled once more when they returned, as a group of Mr Rohner’s friends performed a musical number dressed in Afro wigs. Credit Suisse said the party was not organised by the bank or Mr Rohner, who clashed with Mr Thiam over a spying scandal.

It added that it had implemented ‘a number of initiatives to improve ethnic diversity across the bank’. Mr Thiam, who is 58 years old was born in the Ivory Coast, was ousted from Credit Suisse this year when it emerged that two former employees had been put under surveillance.

Credit Suisse can consider this act of extreme bad taste to be ill timed to say the least.

The company has not been performing very well at all, particularly within its investment banking division which handles Tier 1 FX order flow.

Three years ago, the company made its position clear, with an extensive £1.9 billion loss for the fourth quarter of this financial year on its record, and a total loss for the entire year of almost £2 billion and has been in the doldrums ever since. As far as FX is concerned, non bank market makers such as Citadel Securities and XTX Markets have shown Credit Suisse and other dinosaurs a clean pair of heels for a long while now, despite their much smaller size.

Despite assets under management having grown by 8% over the past three years, the bank continues to be in the red, and made several thousand redundancies in 2017, adding to the 7,200 job losses that took place at Credit Suisse the previous, largely within the investment banking division.

Whilst Credit Suisse has demonstrated extremely good commercial conduct with regard to its interbank eFX business during the loss making years 2016 and 2017, other aspects of its corporate structure have been the subject of regulatory scrutiny and censuring which has cost the bank a fortune.

The settlement with US Department of Justice which totalled £4.3 billion for mis-selling mortgage-backed securities in the lead-up to the financial crisis had been a case in point to which CEO Tidjane Thiam began to concentrate even further on cost cutting.

In February three years ago, in the aftermath of its first reported loss since 2008, the firm confirmed that it was to cut bonuses for its investment banking executives by 36%.

The losses for 2017 were the worst,  when Credit Suisse, which is the largest foreign broker by market share across seven regions in the Asia Pacific region, but has fallen to 14th place worldwide in terms of volume over the last year and a half, reported an annual loss of CHF 2.42bn (£1.65bn) for the full year.

The company’s performance during 2015 was actually worse than the CHF 2.09bn that analysts had forecast, and include a fourth quarter loss of CHF 6.4bn.

Credit Suisse used to have interests in very effective non bank FX ECN FastMatch, which is a highly well organized entity that makes profit and has done very well over its five years since inception.

In 2012, Credit Suisse was one of the founding investors in FastMatch, and owns 40% of the firm along with FXCM which owns 32%.

As a result of the complete decimation of FXCM’s US division by the banning of the company from operating in the US markets as a result of the Commodity Futures Trading Commission (CFTC) having ruled that the firm has been trading against its customers for several years via a market maker in which it had an undisclosed interest and was taking rebates of up to 70% of the market maker’s profits, FXCM CEO Drew Niv and senior Managing Director William Ahdout were removed from the board of directors of FastMatch and replaced by senior Leucadia personnel, it became quite obvious that Leucadia would potentially buy the 32% of FastMatch owned by FXCM, and it certainly would not have been for 32% of $200 to $250 million that the firm was valued at when ICE attempted to buy it.

Thus, Credit Suisse got a bloody nose on that one and now FastMatch belongs to Euronext.

FinanceFeeds maintains that this was to some extent a fire sale, and Credit Suisse may have attempted to increase its mettle by upping its stake in FastMatch at a time during which FastMatch is looking to remove FXCM from its list of shareholders, and then sell the entire firm for a massive profit. This, however, did not happen.

FastMatch, which relies on absolute transparency, will no longer be associated with the opaque activities of its 32% shareholder.

As far as the alleged espionage upon which Mr Thiam was hung out to dry is concerned, the whole thing is very tenuous indeed.

Mr Thiam has denied any knowledge of the espionage, and an investigation did not find any involvement on his part, however trust between him and Mr Rohner deteriorated and Mr Thiam resigned in February after five years at the helm of the Swiss banking giant.

Mr Thiam’s spat with Iqbal Khan, the victim of the spying scandal, sowed the seeds of his eventual downfall. Mr Khan and Mr Thiam publicly locked horns at a party in 2019 over work carried out at Mr Khan’s home, which was next door to Mr Thiam’s.

Mr Khan left months later, but Pierre-Olivier Bouee, Credit Suisse’s chief operating officer and Thiam’s closest confidant, feared Khan would poach staff and employed a firm to track him and record who he met. Mr Bouee was fired over the affair as was head of security Remo Boccali.

Meanwhile the non bank market makers and ECNs continue to do their business properly, and without getting on the wrong side of the regulator, slipping trades, applying assymetrical last look practices, or mocking their executives and clients. They do so with aplomb by contrast, filling trades much quicker than the Tier 1 banks and giving an aligned services to prime of primes.

It is no wonder they are in top slot – and we do not see their executives resorting to puerile and low grade mocking at debauched parties either.