Credit Suisse is shackling its investment bank as it works its way through the Greensill and Archegos body blows.
The Swiss bank’s traders are hamstrung from taking any risks while it reviews its risks and strategy and is scrutinized by its home regulator, the full financial report released on Thursday revealed. It had reported a 252 million Swiss franc ($276 million) loss for the quarter two weeks ago.
«The amount of risk-weighted assets and leverage exposure for both the investment bank and the group will be constrained by the board, in conjunction with Finma, until the review is complete,» Credit Suisse said.
Worst Crisis Seen
The disclosure paints a sobering picture of how, under new Chairman António Horta-Osório, Credit Suisse is picking through the wreckage from Greensill’s $10.1 billion fund debacle as well as the $4.7 billion in losses from its business with Archegos.
The twin disasters, which surfaced publicly within four weeks of each other, led Horta-Osório to tell shareholders Credit Suisse's crisis represent the worst he has ever faced. The board had initiated two probes before he arrived; Horta-Osório now appears to be leading those, given he has been chairman of the bank since last Friday.
Taming Risk Surge
The Swiss bank had already said it needs to tame its bloated risk-weighted assets by $10.4 billion this year, for capital reasons, after a quarterly surge. Finma, its home regulator, has twice demanded a bigger capital cushion: first for Greensill, and later against Archegos, commensurate to its exposure (since largely unwound).
Horta-Osório took over promising an unflinching look at risk, strategy, and culture. Credit Suisse has already seen a raft of departures including risk chief Lara Warner, and top investment banker Brian Chin.
«No Assurance»
Credit Suisse is asking investors for an $1.9 billion cap hike to patch up its capital after the losses, and reneged on two-thirds of last year’s dividend. On Thursday, the bank warned investors that things may get worse – and even more financially material – from here.
«There can be no assurance that any additional losses, damages, costs and expenses, as well as any further regulatory and other investigations and actions or any downgrade of our credit ratings, will not be material to us,» it cautioned. This includes anything from business impact, finances, operations, outlook, liquidity, and its capital position.
Andreas Gottschling, who oversaw risk on its board, stood down hours before he was due for reelection. Richard Meddings, the former chairman of British bank TSB, is standing in as head of the board's risk committee temporarily.
