Analysis of Financial and Liquidity Reporting at Credit Suisse

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Executive Summary
During the summer internship at Credit Suisse, the project was assigned to do a
comparative study of Financial reporting vs FR2052a (5G) Liquidity reporting.
The objective of my project was:
 To gain an understanding of the financial reporting environment (primarily Balance
Sheet and Off-Balance Sheet as per US GAAP).
 To understand what is US liquidity reporting environment (primarily 5G reporting).
 To understand the applicability of the liquidity and financial reporting requirements in
Credit Suisse.
 To understand data flows for the financial and liquidity reporting in Credit Suisse
 To create a linkage between the Balance Sheet and the 5G report and identify items
included/ excluded from liquidity reporting and reasons thereof.
The Financial reports includes statements like Off-Balance Sheet, Balance Sheet, Loss
and Profit accounts, etc. FR2052a(5G) guidelines are mentioned by the US Federal Bank
for liquidity reporting purpose for the entities trading in the US. After the financial
breakdown of 2008, to cover the outflows for the coming 30 days, the Basel Committee
on Banking Supervision (BCBS) enforced Basel III guidelines stating that the major
banks will have to maintain an appropriate level of liquid assets. The first two objectives
were to understand the financial reporting which included understanding the BS and OBS
in a broader sense and to understand the liquidity reporting guidelines.
The process map refers to the flow of data through the various data sources, their treatment and
the various steps for daily and monthly LCR reporting. These include automated adjustments as
well as manual validations and topsides.
The project’s primary objective was a do two-way reconciliation between the financial reporting
and liquidity reporting. The first two objectives helped me to build a base for the primary
objective. I dealt with a lot of data from different sources and teams.
The project helped the team to revisit the 5G reporting environment and fill the gaps. It led to the
appropriate coverage of the Off-Balance Sheet and Balance Sheet.

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CHAPTER 1
Industry Analysis
Due to the repeal of the Depression-era Glass-Steagall Act in late- 1999, a rash of cross-
industry mergers and acquisitions is introduced by Investment banking. Financial
services industry’s deregulation is marked by this repeal. Commercial banks with
insurers, investment banks and securities brokerages are also allowed for offering
services of one another.
I-banks introduces plan of retail brokerage and also lending to their offerings. Investment
banking services are built by Commercial bank. The industry is undergoing There are
some serious consolidation with global level which is considered by the Industry for
allowing different clients to invest and also, they can protect and save their money in
same place. These mergers have only added to the downward pressure on employment in
the industry, an effort is made by Merged institutions for redundancy elimination.
In a recent year, the activities by M&A: JPMorgan Chase bought Bank One; ; National
Commerce purchased by SunTrust; MBNA and Fleet Boston bought by Bank of America
and Charter One acquired by Citizens Financial.
Meanwhile, U.S. markets got some aggressively entries by many foreign Firms which
also include Deutsche Bank. For beefing up global presence of US firms, they are looking
for partners or acquisitions. These changes are happening at many places. In October
2007, Royal Bank of Scotland led consortium and acquired 183-year-old ABN Amro of
the Netherlands in a cost of $101 billion transaction. This deal was the largest banking
deal.
In the recent years the industry has seen a rapid rise in fines and penalties being paid by
major investment banks for flouting and breaking one or the other norms and regulations.
Organizational Structure of Investment Bank
The Investment banks is divided into three different offices which include front office,
middle office, and the back office. Each sector. They ensure some task of bank such as
mitigating risk, making money, etc.

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Front office
The revenue of bank is generated by front office. The Front office can be divided into
three parts: sales and trading, investment banking and research. Sales and trading include
buying and selling products by the bank which is on behalf of clients and bank. From
commodities to specialized derivatives, anything comes under the Traded products.
Investment bank include many types of banking which include merchant banking,
commercial banking, global transaction banking and investment management. Reports
for future earnings prospects are made by some bank which is included in Research. It
also includes reviewing of other companies by bank. These reports are used buy some
companies for their own investment analysis and buy these reports from banks.
Middle Office
The main goal is to prevent investment bank for not to involve in certain activities that
can affect the health of bank. There is ensuring of bank should not include in these
activities. Middle office includes task related to management process such as risk
management, financial control, compliance, etc. The interaction between the front office
and middle office is significant for in capital rising which also ensure that the too much
risk is not taken by company under certain securities policies.
Back Office
The back office provides support to front office for preforming all tasks so that money can
be made for the investment bank. The Back Office includes technology and operations
related to bank.

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Company Analysis
Credit Suisse is a multinational company from Swiss which provide financial services
founded in 1856. The headquarters in situated in Zürich. The company have global reach
which includes over 50 countries to perform the operations. This company consist 48,200
employees from different nations. The company have its broad footprint in the world
which helps in generating a geographically balanced stream of revenues. This company
also allows capturing of many growth opportunities around the world.
Focusing regionally, Credit Suisse has clients from three divisions: Swiss Universal
Bank, Asia Pacific and International Wealth Management. Investment Banking & Capital
Markets and Global Markets are two division, specialize in investment banking
capabilities supports these regional businesses.
The business divisions cooperate provide many financial solutions which include tailored
advice and innovative products.
The company majorly has 4 businesses:
 Investment Banking
 Loans and advances
 Management based on Wealth
 Management based on Asset
On July 5, 1856, Alfred Escher who was a business leader, politician and pioneer, founded
"Schweizerische Kreditanstalt." This bank is known as SKA and provide finance support to the
railroad network with including further industrialization of Switzerland. The first foreign
representative office of the bank is opened up in New York after the 14 years of establishment.
In 1905, one more branch is opened in Basel which was the first branch outside Zurich. This
branch follows the acquisition of Oberrheinische Bank.
Swiss investment bank became successful Bank. Such achievement of development is due to
strong growth with the supplemented by a acquisitions and mergers.
Result of the strong integrated bank creation is due to Philosophies of specialist knowledge. In
2006, the bank provides solutions to the clients related to investment banking, private banking,
and asset management. The bank is operated as a Globally active integrated universal bank for
helping the clients in different area.

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Private, Institutional and Corporate Clients are provided by wide range of financial solutions
with the comprehensive advices by Swiss Universal Bank in Switzerland. The partisition
comprises Corporate & Institutional Banking and the Private Banking.
In Europe, the Middle East, Latin America and Africa, the private, institutional and corporate
clients are provided with financial solutions and expert advice by International Wealth
Management. International Wealth Management fulfill all needs of clients. Global resources and
Capabilities of Credit Suisse is leverage to provide best service to the clients.
Wealthy individuals, corporate clients and institutional investors are provided by investment
banking financial solutions and integrated private banking solutions by Asia Pacific, as the bank
have strong franchise in the Asia Pacific region.
A broad range of equities are offered by Global Markets with fixed services and income
products. The focuses are on supporting Credit Suisse’s and client-driven businesses.
Clients of Corporations, financial sponsors, financial institutions, UHNWI and sovereign are
provided with the services including advisory and an investment banking product by Capital
Markets and Investment Banking.
Corporate services (which is centralized) and business support is provided by Corporate
functions. The Corporate function also provide an independent and effective control procedures
in the following areas:
 Compliance & Regulatory Affairs: The main focus is on coordinating regulator interactions
and monitoring bank activities by The Chief Compliance & Regulatory Affairs Officer.
 Finance: To ensure capitalization and strong balance sheet of a company, the Chief Financial
Officer manages the Group’s liquidity, capital, funding, and expenses.
 Communications, Human Resources and Branding: Responsibility of the Head of this sector
is to focus on employees by retaining, developing and attracting them. Strengthening of the
Credit Suisse is also included in this with development of global communications strategy.
 Risk: The risk management framework of Group is governed by The Chief Risk Officer and
independent risk oversight is also provided.

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Introduction of the Project
The title of the project was:
A comparative study of the Financial Reporting and the FR2052a(5G) Liquidity
Reporting
Need for Liquidity Reporting
On the basis of liquidity, Banks are evaluated. Underinvestment of banks in liquid assets
is converted as a dangerous issue and high-risk in funding of sources which was
revealed by the financial crisis occurred during 2007–08. Banks perform Liquidity risk
function. The maturity mismatch is occurred between assets and liabilities of banks.
These liabilities are remains for short-term which pays according to the other creditor’s
and depositor’s demand. Without enough liquid assets a bank can be in danger and
might be possible to sell assets quickly. Financial system can be affected by some bank
as these banks provided funds for other firms in financial sectors and bank also. BCBS
introduces the rules based on liquidity reporting after financial crisis. all the major
countries followed these rules as per the guidelines given by their countries.
The main role of liquidity risk management in any Banking Organization:
1. The future estimation for funds to meet requirements
2. Estimation of the funds required when the emergency and also ensuring the amount
available. The coordination among different sources for making money in both normal
and emergency conditions.
Need for this Project:
LMR US does a daily submission to US Fed as per the 5G guidelines. The liquidity
reporting is done as per the US GAAP booking positions. Every month end, the team
performs a reconciliation of the reporting that is done with the General Ledger. The data
for the 5G flows from various data houses but ultimately it goes to the GL. So, the
reconciliation that the team performs helps us to know if the statutory reporting and
liquidity reporting are matching or not and there are no unknown differences between
the two reports. So, this project is wider in scope as its two-way reconciliation, looking
at the liquidity reporting from the statutory reporting being the base. It’s been few years

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now since LMR US was incepted. The project will help us revisit and refresh the system.
There will be a proper documentation for the items which do not form a part of the 5G in
Balance Sheet. The proper inclusion of all the ADAC booking position as per the 5G
guidelines is important because that ultimately affects our cash flows.
The objective of the project was:
 To gain an understanding of the financial reporting environment (primarily Balance Sheet
and Off-Balance Sheet as per US GAAP).
 To understand what is US liquidity reporting environment (primarily 5G reporting).
 To understand the applicability of the liquidity and financial reporting requirements in
Credit Suisse.
 To understand data flows for the financial and liquidity reporting in Credit Suisse
 To create a linkage between the Balance Sheet and the 5G report and identify items
included/ excluded from liquidity reporting and reasons thereof.

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Chapter 2
Literature Review:
The project is a budding and an internal one. So, there was no such specific literature on
this project. But to build a base for the project, I went through a number of documents
like:
 Annual Report’s – Consolidation of Off-Balance Sheet and Balance Sheet
 US Fed FR2052a report – discussed in the further pages
 US GARM policies- The purpose of the Group Accounting and Reporting Manual is to
document and communicate the Corporate Accounting Policies of Credit Suisse (CS).
The policies apply to all bank and non-bank subsidiaries of CS. GARM includes policies
that are based on International, Swiss and US generally accepted accounting principles
(GAAP). GAAP provides principles based on financial accounting which recognize the
types of events. On the basis of financial accounting the events are measured and the time
periods required for identification of events. In some instances, specific principles apply
in some instances to banks and the financial industry. These principles are also reflected
in the policies.
 Functional Regulatory Department
 5G Regulatory procedures
 Certifications done from e-learning websites on intranet like Liquidity and Leverage
(Intuition), Treasury Management, US GAAP Repo and SLB Basics , Money Market
Securities , Analysis of the Balance Sheet.
The above readings helped me to equip myself with a ground to start on this project
hands on. The other knowledge came directly from the subject matter experts as and
when required.
Research Methodology
Mapping Process:
 Step 1: Gathered all the ADAC/PID list from all the Reconciliation
Taken the entire March end Recon.
 Step 2: Matching/Comparing the above with FRD, identifying the gaps

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 Step 3: Comparing both the above with the BS, OBS List
 Step 4: Lesioning with APAG, GARM, SMEs
STEP -1
The first step of the mapping process was gathering all the ADACs and PIDs from all the
Reconciliation.
There is a total of One hundred eighteen products in FR2052a out of which forty-four are
reconciled, twenty-nine are out of scope and four does not have any reconciliation
process. All the Group Credit Suisse uses the Application of Data collection i.e. Abroad
Data Accounting and Credit for fulfillment of all reported requirements which are
centrally defined. All the products are assigned one unique ADAC booking positions.
The PIDs were taken from the OBIEE system and mapped with the reconciliation tracker
to have a hundred percent inclusion of all the products. Discrepancies were found as four
PIDs could not get mapped in any category namely; reconciled, out of scope, no
reconciliation process, reconciled with differences known and unknown. The ADACs of
the entire product were taken from the March end reconciliation to have a recent picture.
These ADACs seemed to be an exhaustive list, but to be very sure about the inclusion; I
matched this with the last five-day trading data which was available in the back end of
the system. One of the team members helped to retrieve this data. The ADAC list was
mapped.
STEP -2
The exhaustive ADAC list of 5G products was ready. Now, the second step is a
collection of the Balance Sheet with the Off-Balance Sheet from the Group Accounting
team. There were three BS and OBS covering all the CSG US entities. The BS and OBS
are made as per the ADAC booking position. All the three statements were merged using
the look up function of the excel. It was a tedious task, because ADACs were clashing
with one another, there were duplicate. So, merging BS and OBS took a long time and it
happened with the help of the team.
STEP - 3
This step was the actual mapping process of the BS, OBS with the 5G ADAC list. The
5G ADAC list had some 215 ADACs which were divided into three categories
Unsecured Funding, Secured Funding and Derivatives. Three separate files were prepared
with three tabs in each; one – ADAC reconciliation list, the consolidated BS/OBS part

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and the BS/OBS section pertaining to the 5G product category. Then, the mapping was
done and most of the 5G ADAC got mapped to the BS/OBS, the ones that didn’t get
mapped were checked in the OBIEE rules and Functional Requirements Document for
the 5G. Some of the unmapped ADACs got an answer with the help of these two
documents.
STEP – 4
The three categories Unsecured, Secured and Derivative’s respective BS/OBS sections
got covered. But as 5G reporting is done for the liquid assets and liability, a large part of
the BS/OBS remained unmapped. So, this step was providing reasons for the ADACs that
didn’t get mapped. Items like fixed assets, intangible assets like goodwill, etc. directly
got out of scope as per the 5G guidelines. Others got an answer with the help of FRD,
GARM policy. Some of the reasoning came from the subject matter experts and the
director himself. The queries for the remaining gaps will be sent to the
APAG team, who are responsible for the accounting policy assurances.
Limitations of the Study:
This project was limited to only LMR US region. It can be further broadened to other regions
like APAC teams viz. Singapore, Hong Kong, Japan and Korea, EMEA and Zurich. This will
lead to the scope for comparison of the LCR processes for the different regions according to the
regulatory norms prescribed by their specific central banks. This will give an idea about the
liquidity requirements for different regions. Gaps can be identified in the regulatory requirements
for each of these entities that can be leveraged to improve resilience.
The functional documents relating to liquidity reporting of US was not updated. The items which
didn’t get an explanation where supposed to be taken to the APAG team , but due to shortage of
time it was out of the scope of my project.

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Chapter 3
MAIN LEARNINGS
Credit Suisse Organizational Structure
The Organizational structure is based on the divisions which is based on regions such
division include: International Wealth Management, Universal Bank, and Asia Pacific.
Investment Banking & Capital Markets and Global Markets are specialized with the
capabilities in investment banking supports these divisions.
 Swiss Universal Bank: This bank offers different services which includes
investment banking and retail banking for individuals, corporate banking, private banking
and wealth management, corporations and institutions domiciled in Switzerland.
 International Wealth Management: This type of management provider provides
products and services based on wealth management to private clients in Europe, Africa,
Latin America and the Middle East.
 Asia Pacific: Investment banking financial solutions and integrated private
banking solutions are provided by Asia Pacific to institutional investors, wealthy
individuals and corporate clients. The Growth is on high level for the Asia Pacific region.
 Global Markets: Fixed income products with fixed services are provided.
Specialization of Global Markets is in equities which also includes prime brokerage,
sales, trading, research and underwriting. Clients included in this type of market are
financial institutions, governments, corporations and institutional investors.
 Capital Markets and Investment Banking: The main focus is on the advisory
services which is related to mergers and acquisitions. This work of division is performed
with financial institutions, ultra-high-net-worth individuals, corporations, financial
sponsors, and sovereign clients.
The above businesses are the operating line. The Corporate functions supports the
operating business which also includes the newly positions of Chief Compliance and
Regulatory Affairs Officer and Chief Operating Officer. Corporate services which are
centralized and business support are provided by Corporate functions. It also provides
control procedures which is independent and effective in the following areas:
 Finance: Group’s capital is managed by the Chief Financial Officer. Officer also
ensure for capitalization and for strong balance sheet.

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 Operations, Technology and Services: The Chief Operating Officer focuses on
transformation of Credit Suisse. The officers also help for Global operations and
information technology.
 Risk: The Group’s risk management framework is governed by the Chief Risk
Officer governs and also provides risk oversight which is totally independent.
 Compliance & Regulatory Affairs: The main focus of the Chief Compliance &
Regulatory Affairs Officer is on coordination between regulator interactions and
monitoring bank activities.
 General Counsel: Legal policies are provided by the General Counsel with the
regulatory advice. These advices are all legal matters and investigations. The
strategic legal risk management is implemented for maintaining relationship between
stakeholders.
 Communications, Human Resources and Branding: The Head this sector is
responsible for a development and growth of employees. The global communications
strategy are developed for increasing brand value in market.
The company operates in three segments:
Products and services based on investment banking and securities are supplies by
Investment Banking segment to the clients in corporate, government and worldwide.
Investment advice are also offered by the Private Banking segment offers the advices are
management solution which include wealth management solutions, pension planning,
tax-wealth planning and life insurance products.