Fitch IBCA Affirms Rtgs CSFB Entities: Japanese Reg Verdict.

LONDON--(BUSINESS WIRE)--July 29, 1999--

Fitch IBCA affirms the ratings of Credit Suisse First Boston (CSFB), Credit Suisse Financial Products (CSFP), and related entities following today's announcement by the Japanese authority, the Financial Reconstruction Commission (FRC), that it is to revoke the banking licence of CSFP's Tokyo branch and impose operating restrictions on CSFB's Tokyo branch.

In addition, further restrictions will be placed on other Credit Suisse Group entities.

Although the investigation by the Financial Supervisory Agency (FSA - the inspection department of the FRC), raises serious reputational issues, Fitch IBCA is satisfied that the action taken by certain employees of CSFP, Tokyo, in obstructing the activities of the FSA was exceptional and not representative of the risk management culture or systems within CSFP, which remain excellent. It should be noted that the shredding of documents important to the FSA's investigation was discovered by CSG employees, reported to the FSA, and that destroyed documents were recovered and passed onto them. In addition, whilst the structured derivative transactions at the heart of the FSA's investigation are regarded by the Japanese regulators as 'inappropriate', they are nevertheless legal and have been a common feature of the Japanese financial system in recent years. The rating action also reflects the small contribution made by Japan in recent years to the earnings of both CSFP and CSFB. The closure, therefore, of CSFP's Japanese office is not expected to have any meaningful impact on its profitability, which remains good. Also, the decision by the FRC to effectively temporarily bar Credit Suisse from the Japanese private banking and assessment management markets is for a limited period only.

The main conclusions of the FSA's investigation were that employees of CSFP had obstructed its investigation, that CSFP engaged in a number of 'inappropriate' structured transactions with Japanese entities, designed to remove assets off-balance sheet, and that 'firewalls' between Credit Suisse entities in Japan were inadequate (in particular between CSFP and CS Trust and Banking Co. Ltd). As a result, based on the recommendations of the FSA, the FRC has decided to revoke the banking licence of CSFP's Tokyo branch (effective 30 November), placed restrictions on CSFB's Tokyo branch (designed to stop the transferral of CSFP's business to CSFB), placed a moratorium on new business for CS Trust and Banking (the bank has the right to reapply for a licence after a year), and a moratorium on new business for Credit Suisse's private banking and asset management representative offices of one year and one month respectively.