ZURICH (Reuters) - Credit Suisse faces the threat of a new investigation into its role in helping wealthy Americans avoid paying taxes after New York state's top financial regulator requested documents from the Swiss bank.
Switzerland's second-largest lender had raised expectations it was putting the long-running American tax controversy behind it when it set aside an extra half a billion dollars last week to deal with a U.S. Department of Justice probe into its involvement in offshore tax evasion.
But Benjamin Lawsky, New York's financial services superintendent, is now examining whether the bank lied to New York authorities about creating tax shelters, raising the prospect of a new probe, a source familiar with the matter told Reuters.
Shares in Credit Suisse dropped 2.2 percent to 28.82 Swiss francs in Zurich on Monday as investors digested the possibility of a costly investigation.
"There is still a lot of uncertainty around all these legal issues at Credit Suisse. Nobody can tell how much it will really cost in the end," said Peter Stenz, portfolio manager of Swiss equities at Swisscanto, one of the 50 largest stakeholders in Credit Suisse.
Credit Suisse has so far set aside 895 million francs ($1 billion) to deal with tax and securities law matters in the United States, above the $780 million Swiss rival UBS paid in 2009 to settle charges it sheltered U.S. citizens from the taxman.
After years of stalemate as Bern and Washington clashed over a wider tax dispute, there have been recent signs that Credit Suisse was closing in on a deal with U.S. authorities.
In February, the bank reached a 196 million franc settlement with the U.S. Securities and Exchange Commission in a related tax dispute and a few days later Chief Executive Brady Dougan apologized to U.S. senators for the bank's misconduct but blamed it on a small group of rogue bankers and said it stopped in 2008.
While the Department of Justice has considered a deferred-prosecution agreement that would suspend any indictment in exchange for a large cash penalty, it is also pushing for a guilty plea from a Credit Suisse subsidiary, according to a New York Times report on Sunday.
The cash penalty is expected to be more than the $780 million fine UBS paid in 2009, the newspaper said.
While the Department of Justice has been criticized in Washington for the slow pace of its inquiry into Swiss banks, Lawsky, a former federal prosecutor, has a track record of going his own way and getting results.
Last year, he extracted $250 million from the Bank of Tokyo-Mitsubishi UFJ over sanction violations, far higher than the $8.57 million the Treasury Department settled for.
Lawsky also played hardball with Standard Chartered over sanctions violations, threatening to revoke its state license, and stopped working with other agencies which were also pursuing the bank.
Standard Chartered later agreed to pay New York $340 million and settled with other agencies for $327 million.
Credit Suisse's litigation headaches come as the bank is buffeted by a slowdown in fixed income sales and trading, putting CEO Dougan under pressure to accelerate a pull-back from riskier areas of investment banking that are expensive to run.
The U.S. pursuit of tax dollars sheltered in offshore accounts has piled pressure on Swiss banks. Credit Suisse said in February it had lost over 35 billion francs in withdrawals from western Europe, as clients, spooked by the probe, pull out.
Amid the U.S. scrutiny, Credit Suisse, like UBS, is leaning more heavily on its private banking franchise to compensate for the drop in investment banking returns.
More than a dozen Swiss banks, including Credit Suisse, Julius Baer and the Swiss arm of Britain's HSBC are under criminal investigation in the United States while scores of smaller banks have agreed to work with U.S. authorities to cap penalties they might face.
($1 = 0.8935 Swiss francs)
(Reporting by Silke Koltrowitz and Oliver Hirt; Additional reporting by Joshua Franklin in London; Writing by Carmel Crimmins; Editing by Pravin Char)