The cozy world of Swiss banking is being rocked by a criminal investigation linked to the defection of a top Credit Suisse executive to crosstown rival UBS.
Prosecutors in Zurich have opened a case concerning potential coercion or threats following a complaint made by the former head of wealth management at Credit Suisse, Iqbal Khan.
Arrests were made in connection to the case, a spokesperson for the prosecutors told CNN Business, but those individuals have been released.
According to Swiss media reports, Credit Suisse (CS) placed Khan under surveillance ahead of his move to rival bank UBS (UBS), fearing that he would poach colleagues, leading to a confrontation involving the banker and private investigators on the streets of Zurich.
Credit Suisse said in a statement that it “took note” of the media reports regarding Khan, and said its board had “decided to launch an investigation into these events.” The people conducting the investigation will “report directly” to Credit Suisse Chairman Urs Rohner, the bank said.
The episode, and subsequent media reports alleging a rocky relationship between Khan and Credit Suisse CEO Tidjane Thiam, have roiled the highly competitive world of Swiss banking.
Credit Suisse and UBS compete with other Swiss financial services companies for top talent, and to persuade wealthy clients to entrust them with their money to invest.
Wealth management has become an even bigger focus for Swiss banks and rivals elsewhere in Europe as they seek to offset a decline in investment banking revenue and the impact of negative interest rates on their lending margins.
UBS is the world’s largest wealth manager with $2.3 trillion in assets at the end of 2018. Credit Suisse had assets of $1.4 trillion.
Khan, 43, is due to start as co-president of the international wealth management arm of UBS on October 1. Credit Suisse announced his departure in July, but he remains an employee of the bank until the end of September.
Khan is credited with transforming Credit Suisse’s wealth management division, overseeing a 52% increase in profit between 2016 and 2018.
A senior executive at one private bank in Zurich told CNN Business that employers often worry that departing executives may try to poach colleagues when they leave for a new job.
“You have the person’s word that they won’t poach people, but you don’t know,” said the executive, who requested anonymity in order to speak freely.
UBS declined to comment. But the bank has been forced to enter the fray. UBS Chairman Axel Weber said in a television interview this week that the surveillance issue was between Khan and Credit Suisse.
Weber told Bloomberg TV on Wednesday that UBS was still conducting due diligence on its new hire.
Credit Suisse declined to comment on when its investigation into the reported surveillance would conclude.
The Swiss bank has enjoyed a period of improved performance under Thiam, posting a profit for the first time in four years in 2018. He has undertaken a major strategy overhaul, trimming Credit Suisse’s investment banking operations and implementing cost cuts.
Despite that success, Credit Suisse stock is down 44% since he took over in March 2015.