ZURICH Credit Suisse Group chief executive Lukas Muehlemann said Friday that Switzerlands second-largest bank, whose Credit Suisse First Boston securities unit is under investigation, will tighten internal controls.
Authorities in the United States are investigating initial public offerings managed by the New York unit and its chief technology investment banker, Frank Quattrone, to determine whether Credit Suisse forced investors to make additional purchases after shares started trading or charged excessive commissions. Credit Suisse First Boston has suspended three employees in connection with the investigation.
Credit Suisse has doubled its investment banking staff over the past two years, to 28,000, partly through purchases including that of Donaldson Lufkin & Jenrette Inc. in 2000. Led by Mr. Quattrone, whom Credit Suisse hired away from Deutsche Bank AG, CSFB arranged more technology IPOs than any other firm last year.
This employee growth posed major challenges, including those relating to the control and monitoring systems, Mr. Muehlemann said at a shareholder meeting here. That is why consolidation and the continued improvement of internal processes and controls are now top priorities.
Mr. Muehlemann, who did not detail what controls will be implemented, made a similar statement in May. His companys shares fell as much as 0.5%, to $180, in Zurich Friday morning after he spoke.
Mark Hoge, an analyst at Bank of America Securities in London, said Credit Suisse executives are very concerned about what the market thinks. The company wants to send a message to the public that its not going to tolerate looser controls or lower ethical standards.
The investigation involves at least eight other Wall Street firms, including Goldman Sachs Group Inc., Morgan Stanley Dean Witter & Co., and J.P. Morgan Chase & Co.
But Credit Suisse First Boston, which is headed by Allen Wheat, was the first to be contacted by the Securities and Exchange Commission, about a year ago. It was the biggest underwriter of computer, software, Internet, and semiconductor company initial stock sales in 1999 and 2000, garnering a quarter of the market. In a regulatory filing last month, CSFB said the National Association of Securities Dealers is contemplating bringing a proceeding against the investment bank concerning IPO allocations and commissions.