Source: Credit Suisse Group AG
Source: Credit Suisse Group AG
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Leaders of Credit Suisse Group AG are discussing replacing risk director Lara Warner after a series of mistakes at the bank caused losses that could add up to billions of dollars, according to people on the subject.
The bank is expected to inform investors of the impact of its exposure to the collapse of Archegos Capital Management and the aftermath of Warner and other senior executives this week, citizens said, asking that no private plans were identified. CEO Thomas Gottstein is expected to continue, according to people.
Another executive who is under control is Brian Chin, general manager of his investment bank, two of the people said. They also said the Swiss firm is planning a review of its main brokerage business, which is under its investment bank.
A Credit Suisse spokesman declined to comment.
Gottstein took over in February 2020 following an espionage scandal that wiped out his predecessor and promised a clean slate for 2021 after legacy issues mentioned his first year. Instead, the company has been overwhelmed by repeated lapses of oversight, including the great successes of the collapse of Greensill Capital and the Archegos Revolts. The explosions have left analysts wondering if Credit Suisse has a systemic problem in risk management and investors are facing another quarter of losses.
Credit Suisse is the world’s largest performing bank with the worst performance this year, as a strong start to its investment banking business was overshadowed by the bank’s exposure to Greensill and Archegos.
A $ 140 million secured loan from commercial financier Lex Greensill’s firm is now in default, though administrators have recently paid $ 50 million. A $ 10 billion fund group that the asset management unit managed with Greensill is being developed.
Before the final success of this affair could be reckoned with, executives had to resort to the imminent success of the fall of Bill Hwang’s Archers. The loss of Hwang’s opaque, leveraged transactions could reach billions, according to people familiar with the subject. Collectively, the banks affected by Archegos ’operations could be Until $ 10 billion, according to JPMorgan analysts.
Additional scrutiny
The two crises of the last month have meant additional control over Warner, after a long line of mistakes in the investment bank and beyond. From the exhibition to the Luckin Coffee Inc. Fraud to a $ 450 million impairment in a stake in York Capital Management, the ongoing damage to the lender’s reputation has increased management control.
The bank’s share buyback program of 1.5 billion Swiss francs ($ 1.6 billion) runs the risk of being stopped for the second time (after being stopped for the first time at the start of the pandemic last year) and losses could put pressure on the bank’s dividend distribution. S&P Global Ratings downgraded its outlook for the bank from negative to stable to risk management concerns.
Once it makes a profit of more than $ 5 billion, it would begin to put pressure on Credit Suisse’s capital position, according to JPMorgan. Swiss regulator FINMA raised Credit Suisse’s requirements in relation to its second pillar interim report, after the bank warned it could suffer a loss due to the liquidation of supply chain financing funds.
In his first remodel last year, Gottstein elevated Warner to the forefront of risk and compliance. The promotion made her the bank’s top executive woman and reinforced the role of risk officer Tidjane Thiam had given her in 2019, with the mission of clearing up the legacy issues. She joined Credit Suisse as an equity analyst in 2002 and held various senior research positions until she became Chief Financial Officer and Chief Operating Officer of the Investment Banking Unit in 2010.
Along with Warner, Chin was a big winner in the Gottstein shake last summer, when the chief negotiator also gained control of the investment bank after a merger of the two units.
Read more about credit Swiss executives under control
– With the assistance of Ruth David and Marion Halftermeyer
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