Credit Suisse quantified the impact of the collapse of Archegos Capital at $ 4.7 billion and announced the decision to cut its dividends, as well as the resignation of some corporate executives in the investment banking and risk management sectors. “The Board of Directors has launched two investigations, which will be carried out by external parties, into the question of supply chain funds and the question of the US-based hedge fund,” the Swiss bank said.
The US hedge fund is Archegos Capital Management, which recently defaulted on margin calls presented by the Swiss bank, resulting in estimated losses of 10 billion dollars. Separately, in early March, Credit Suisse had frozen $ 10 billion in supply chain investment funds linked to the now insolvent holding company Greensill Capital. Investment banking manager Brian Chin will leave the board on April 30 and will be replaced on May 1 by Christian Meissner, a veteran who has worked for Bank of America and Goldman Sachs.
Chief Risk and Compliance Officer, Lara Warner, will also leave her role on April 6. Credit Suisse also intends to appoint Joachim Oechslin as interim Chief Risk Officer, who will join the Board of Directors. Thomas Grotzer, general councilor and member of the board of directors since 2016, will become head of global compliance in a provisional position. The bank also decided to reduce its ordinary dividend proposal to 0.10 Swiss francs gross per registered share, compared to the previous proposal of 0.29 chf in cash announced in February. Furthermore, to strengthen the capital, it will suspend the share buyback programs and the remuneration of the bonuses for the members of the board of directors for 2020.
The double blow inflicted by the exposure to Archegos and Greensill, both collapsed after a few weeks, represent the greatest challenge for the Swiss bank in recent years, at a time when it is engaged in a transition in corporate leadership. Gottstein, the bank’s chief executive, took over a year ago after his predecessor, Tidjane Thiam, was ousted over a spying and stalking scandal against an executive. At the end of the month, President Urs Rohner will also retire and will be replaced by a figure outside the bank, the CEO of Lloyds Banking Antonio Horta-Osorio. The current crisis has triggered the need to reconsider the way the bank operates.
The ongoing investigations will also examine how the bank, despite large investments in risk controls and oversight, has become deeply involved in both situations. In the case of Greensill, in particular, the Swiss bank has changed relations with the company several times in recent years, while continuing to expand the collaboration. One of the most tangible consequences of the Greensill exposure emerged from the fluctuating trend in the price of Credit Suisse shares, in the wake of fears that the bank will be required to compensate, at least in part, all those who invested in the Greensill funds .
It could take years for the bank to recover money from Greensill’s insurers and borrowers. According to preliminary estimates, the losses from these funds could reach 1.5 billion dollars. Three weeks after the collapse of Greensill, the bank found itself involved in the collapse of Archegos. According to the first estimates of the analysts, the exposure to the US hedge fund would have cost her between 3 and 4 billion dollars. Losses recorded by Archegos Capital Management, managed by former Tiger Asia manager Bill Hwang, triggered the liquidation of nearly $ 30 billion worth of positions, according to the Wall Street Journal last week. Large banks – including Morgan Stanley, Goldman Sachs and Deutsche Bank – served as prime brokers at Archegos, processing the fund’s operations and lending the company cash and securities.