Credit Suisse blamed price-rigging traders in its fixed-income division for forcing Switzerland’s second-largest bank into a profit warning for the first quarter yesterday.

According to the bank’s annual report, released yesterday, the remuneration of the executive board fell by 35 per cent on average for last year, in part because of the SwFr2.8 billion (£1.4 billion) writedown from the traders’ fraud. The bank admitted yesterday that a group of traders, thought to be based in London and New York, had purposely misvalued their positions on collateralised debt obligations (CDOs) when marking them to market. It is believed that they had hoped to protect their bonuses from being hit by the plunging value of mortgage-backed securities.

Last month the bank stunned the market by revealing that it had uncovered the inaccuracies only a week after it appeared to have shrugged off the worst of the credit crunch with a full-year profit of SwFr8.5 billion. It said then that it had written down SwFr3.2 billion on credit market investments for 2007.

At the time of the announcement, Brady Dougan, the chief executive, played down suggestions of fraudulent activity by the traders, who were led by Kareem Serageldin, the bank’s global head of synthetic CDOs.

Credit Suisse said yesterday, however, that after an internal review, it had found that “the pricing errors were, in part, the result of intentional misconduct by a small number of traders . . . The review also found that the controls put in place to prevent or detect this activity were not effective.”

The traders, who failed to mark to market positions or marked them to incorrect prices, have been dismissed or are in the process of being dismissed.

Credit Suisse said that, as a result of the fraud and continued deterioration in the market for the CDOs, it would write down the value of the assets by a further SwFr2.8 billion. It said that almost SwFr1.2 billion of the writedown related to the fourth quarter of last year, with the remaining SwFr1.6 billion having an impact on first-quarter earnings.

As a result, Credit Suisse’s profits for the fourth quarter were revised from about SwFr789 million to SwFr540 million.

The bank also said: “In the light of the difficult market conditions in March, at this time Credit Suisse believes it is unlikely to be profitable in the first quarter.”

Mr Dougan will be paid SwFr22.3 million for last year, with 80 per cent of his remuneration comprising shares in the company. The 13 members of the executive board were paid SwFr162.1 million in total.

This is down, on average, from the SwFr153 million that was paid to the eight people on the board last year. The company attributed the change, in part, to Credit Suisse’s financial and share price performance during 2007.

Analysts were unsurprised by the profit warning. They calculated that the bank had SwFr15.7 billion of remaining exposure to CDOs, which could lead to further writedowns if the markets continued to weaken.

On Wednesday, Hans-Rudolf Merz, Switzerland’s Finance Minister, insisted that there was no crisis in the country’s banking sector. He said that looking beyond Credit Suisse and UBS, Switzerland’s largest bank, which reported a $18.4 billion (£9.3 billion) writedown last year, the sector had performed well.

Times Recommends

• Darling under pressure on record public debt
• Mortgage lending falls 32% as drought deepens
• Oil prices firm after 10% drop to below $130