By Andrew R. Johnson
Credit Suisse Group AG's ability to serve as a counterparty to
the Federal Reserve Bank of New York hasn't been affected by the
Swiss bank's criminal tax-evasion settlement reached earlier this
week with U.S. authorities.
The New York Fed considered the bank's settlement and decided to
continue its counterparty relationship with Credit Suisse, a New
York Fed official said Wednesday. The official noted that Credit
Suisse's settlement pertained to activities that didn't involve the
bank's broker-dealer business, and that the bank has taken steps to
address compliance issues.
Primary dealers trade billions of dollars of government
securities with the Fed every day, and must meet various broker
financial requirements and other standards to participate.
Credit Suisse is one of 22 such firms. A spokeswoman for Credit
Suisse declined to comment.
The firm keeping its primary-dealer status is the latest example
of how the criminal guilty plea that the firm reached with
prosecutors is designed to minimize the collateral damage that
historically flowed from guilty pleas or criminal convictions.
Under a settlement reached with federal and state authorities on
Monday, Credit Suisse became the first financial institution in
more than a decade to plead guilty to a criminal charge. The bank
admitted that it helped wealthy Americans evade taxes and agreed to
pay $2.6 billion as part of the settlement.
The bank's U.S. regulators also agreed to not revoke any
licenses, which could have forced it out of business in the
U.S.
Credit Suisse said Monday that it didn't expect the settlement
to affect its licenses or impact its operational capabilities.
A copy of a policy for primary dealers posted on the New York
Fed's website says that the "nature of its relationship with
primary dealers is a counterparty relationship, not a regulatory
one."
The policy calls for firms to "maintain a robust compliance
program, including procedures to identify and mitigate legal,
regulatory, financial, and reputational risks."
The agency won't designate firms as primary dealers if they have
recently been "subject to litigation or regulatory action or
investigation that the New York Fed determines material or
otherwise relevant to the potential primary dealer relationship,"
the policy says. The New York Fed considers how such issues have
been resolved and "consult with the appropriate regulators for
their views."
For existing primary dealers, the New York Fed may limit their
participation or terminate a relationship if a firm becomes
involved in regulatory or legal proceedings that the agency
determines could negatively affect the relationship, the policy
says.
Write to Andrew R. Johnson at andrewr.johnson@wsj.com