Source: Credit Suisse Group AG
Source: Credit Suisse Group AG
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Credit Suisse Group AG leaders are discussing the replacement of chief risk officer Lara Warner after a series of mistakes at the bank led to potentially losses totaling billions of dollars, according to people familiar with the matter.
The bank is expected to give investors an update on the impact of their exposure to the collapse of Archegos Capital Management and the consequences for Warner and other top executives this week, people said, who asked not to be identified describing private plans. CEO Thomas Gottstein must stay, people said.
Another executive whose role is under scrutiny is Brian Chin, CEO of his investment bank, two people said. They also said that the Swiss firm is planning a review of its top-tier brokerage business, which is hosted by its investment bank.
A Credit Suisse spokesman declined to comment.
Gottstein took over in February 2020 following a spying scandal that brought down his predecessor and promised a clean record for 2021 after legacy problems hampered his first year. Instead, the company was overwhelmed by repeated oversight oversights, including major successes from the collapse of Greensill Capital and the Archegos turmoil. The explosions left analysts wondering if Credit Suisse has a systemic risk management problem and investors face another quarter of losses.
Credit Suisse is the worst performing bank in the world so far this year, as a strong start to its investment banking business has been overshadowed by the bank’s exposure to Greensill and Archegos.
A collateralized $ 140 million loan to commercial finance lender Lex Greensill is now in default, although $ 50 million has recently been repaid by managers. A group of $ 10 billion funds that the asset management unit managed with Greensill is being disbanded.
Before the final blow to this case could be counted, executives had to resort to the impending blow to the collapse of Bill Hwang’s Archegos. The damage from Hwang’s opaque and leveraged transactions could amount to billions, according to people familiar with the matter. Collectively, the banks affected by the Archegos negotiations can be until $ 10 billion, JPMorgan analysts estimate.
Additional Analysis
Last month’s two crises brought additional scrutiny over Warner, after a long line of other mistakes in the investment bank and beyond. From exposure to With the Luckin Coffee Inc. fraud at a loss of $ 450 million from a stake in York Capital Management, the continued damage to the creditor’s reputation has increased management’s scrutiny.
The bank’s repurchase program of 1.5 billion Swiss francs ($ 1.6 billion) is in danger of being stopped for the second time – after it was stopped at the start of the pandemic last year – and losses can pressure the bank’s dividend distribution. S&P Global Ratings downgraded its outlook for the bank from stable to negative, pointing to risk management concerns.
A hit of more than $ 5 billion in profit would begin to put pressure on Credit Suisse’s capital position, according to JPMorgan. Swiss regulator FINMA increased Credit Suisse’s requirements in its Pillar 2 buffer after the bank warned it could incur losses by closing supply chain financing funds.
In his first remodeling last year, Gottstein elevated Warner to the position of chief risk and compliance officer. The promotion made her, perhaps, the bank’s most senior executive, and reinforced the role of risk director that Tidjane Thiam gave her in 2019, with a mission to solve legacy problems. She joined Credit Suisse as a stock analyst in 2002 and held several 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 Gottstein’s jolt last summer, when the chief commercial officer also gained control of the investment bank after the merger of the two units.
Read more about Credit Suisse executives under scrutiny
– With the help of Ruth David and Marion Halftermeyer
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