New scandal deals another blow to CSFB

Credit Suisse First Boston's New York headquarters Keystone

Credit Suisse First Boston (CSFB) has been accused of breaching stock market rules in New Zealand during a takeover battle. The charge is the latest blow to the group's reputation following similar scandals in India, Japan and the United States.

This content was published on June 6, 2001 minutes

The New Zealand Stock Exchange (NZSE) ruled that CSFB had bought shares in the New Zealand winemaker, Montana, on behalf of the Australian brewer, Lion Nathan, in a period when the brewing group was not allowed to increase its stake.

CFSB, the investment banking arm of Credit Suisse, had argued that the trades were agreed after restrictions on Lion Nathan had been lifted - a claim which was rejected by the NZSE.

CSFB spokesman, Paul Rimmer, told swissinfo that the investment bank had acted within the market regulations.

"CSFB believes it acted properly at all times and in accordance with accepted market practice and within the relevant rules," explained Rimmer. " We do not believe that we are guilty of what has been said about us."

The ruling could force Lion Nathan to give up all or part of its stake in Montana, paving the way for a bid by the British drinks giant, Allied Domecq.

Barclay's Stockbrokers analyst, Ian Hedges, told swissinfo that the news from New Zealand would certainly be a blow for CSFB's reputation.

"Taken alongside the other problems throughout the globe especially in India, and in Japan and the US, it's really adding up to a picture of a bank that's lost control of its overseas divisions," he said.

The ruling is the latest blow to CSFB, which has seen its credibility hit in recent months by a series of scandals.

On Tuesday, Indian regulators upheld a ban on CSFB's broking arm amid accusations that the bank was involved in manipulating Indian share prices. That followed a ruling in Japan last March, in which CSFB's derivatives arm was found guilty of concealing market information.

CSFB is also accused of violating US antitrust laws in its allocation of initial public stock offers.

"The problems CSFB is now experiencing came about because of the expansion of the group in recent years particularly through acquisitions," said Hedges.

Last week, Credit Suisse boss, Lukas Mühlemann, told the group's annual general meeting that he would be giving top priority to improving internal controls and procedures.

"Systems and controls at the end of the day are very important for investment banks to ensure compliance with local rules as well as to ensure that central controls over compliance are also monitored," explained Hedges.

Certainly the growing list of scandals which have affected CSFB are certain to affect the investment bank's business, according to Hedges.

"The spate of problems they have experienced in recent months is certainly beginning to cast a cloud over their reputation and could certainly lead to the loss of mandates going forward," said Hedges. "It seems unlikely that potential clients are going to ignore the recent bad news that has been associated with CSFB."

swissinfo with agencies

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