Tripping over what seems like a relatively minor restatement shows an inability to prioritize or assess risks accurately, finews.asia editor Andrew Isbester writes in a comment.

It is likely to remain lost to the mists of time as to who will have ended up being the most embarrassed. The SEC staffer who made the call last Wednesday night or harried members of Credit Suisse’s accounting teams responsible for little scrutinized portions of its annual financial disclosure.

In any case, those at the bank responsible for the consolidated statement of cash flows or the ones handling basic restatements have been more likely than not tiptoeing around the office very quietly since last week.

Zero Tolerance

As finews.asia has extensively reported, this was all a supposed example of zero tolerance by Credit Suisse’s new leadership after years of losses and debacles, most of which were of its own making. If it was the case, then it was a feeble one.

Instead, this shows an inability to prioritize risks and correctly assess them for what they are. It simply blew something way out of proportion. Indeed, that very something, at least based on current perspectives, looks very manageable, even forgettable.

SEC Remains Mum

What do we know at this point? Internal sources at the bank maintain it really was a late-breaking query related to cash flow restatements. The SEC, when asked, «respectfully» declined to comment.

They said this despite an extremely long-winded question on the part of this journalist emphasizing the bank’s societal significance to Switzerland. It was a fact clearly lost on the American regulator.

Something Amiss

But as other commentators on finews.asia have indicated, there is something clearly amiss here. The SEC was more likely than not to have made the comment earlier. If not, then that is on them, not the bank, which renders the decision by the bank even less comprehensible.

The annual disclosure process at a major bank is arduous. Planning usually starts relatively early in the year. All reports are comprehensively reviewed by internal and external accountants, down to a final page-by-page turn where every number being printed is read out and comforted by the teams involved, or at least used to be.

In-house and outside legal counsel review all material disclosures and are usually acutely aware of all and any open questions by a regulator as significant as the SEC. Then, senior management must sign off on almost every detail thanks to Sarbanes-Oxley, which has resulted in a complicated, clumsy cascade of required sub-signatories at many listed institutions.

Someone Knows

That just makes the decision by management even less understandable. Someone had to know there were open questions and it was their job to get management comfortable with publishing despite them. 

It was not really a question of zero tolerance for risk, particularly since none of this impacts the bank’s current numbers. If it did, that would then be something to worry about.

What News?

But if this is how they handle a bagatelle issue, then it seems more than likely they will continue to misjudge, and even miss the larger, more significant ones. They are also likely to go down in history as the first bank ever to make anyone, anywhere, scrutinize the cash flow statement of a financial institution.