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UPDATE 1-Credit Suisse clears CEO in spying probe, COO Bouee to go

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ZURICH, Oct 1 (Reuters) - Credit Suisse on Tuesday cleared Chief Executive Tidjane Thiam in an internal investigation into the botched surveillance of the bank's former wealth management head Iqbal Khan in a probe that cost Thiam's right-hand man his job.

Chief Operating Officer Pierre-Olivier Bouee resigned after the investigation by the Homburger law firm found he alone initiated observation of Khan, who abruptly left in July and later joined arch-rival UBS.

"The Board of Directors considers that the mandate for the observation of Iqbal Khan was wrong and disproportionate and has resulted in severe reputational damage to the bank," Switzerland's second-biggest bank said in a statement.

"The Homburger investigation did not identify any indication that the CEO had approved the observation of Iqbal Khan nor that he was aware of it prior to September 18, 2019, after the observation had been aborted," the bank said.

Two big shareholders had said they wanted Tidjane, architect of a sweeping three-year revamp at the bank he joined in 2015, to stay unless it was shown he broke the law.

Credit Suisse launched the enquiry to find out the circumstances that led to a confrontation in Zurich on Sept. 17 between Khan and private detectives that Credit Suisse had hired to tail him.

"Neither the Homburger investigation nor the observation of Iqbal Khan identified any evidence that Iqbal Khan had attempted to poach employees or clients away from Credit Suisse, contrary to his contractual obligations," it said. (Reporting by Silke Koltrowitz; Editing by Michael Shields and John O'Donnell)