Credit Suisse Weighs Replacing Risk Chief After Miscues

Credit Suisse Weighs Replacing Risk Chief After Miscues

Lara Warner

Source: Credit Suisse Group AG

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Credit Suisse Group AG leaders are discussing replacing chief risk officer Lara Warner after a string of miscues at the bank led to losses potentially totaling billions of dollars, according to people briefed on the matter.

The bank is expected to give investors an update on the impact of its exposure to the collapse of Archegos Capital Management and the fallout for Warner and other top executives this week, said the people, who asked not to be identified describing private plans. Chief Executive Officer Thomas Gottstein is expected to stay on, the people said.

Another executive whose role is under scrutiny is Brian Chin, CEO of its investment bank, two of the people said. They also said the Swiss firm is planning a review of its prime brokerage business, which is housed under its investment bank.

A Credit Suisse spokesperson declined to comment.

Gottstein took over in February 2020 in the wake of a spying scandal that took down his predecessor and pledged a clean slate for 2021 after legacy issues marred his first year. Instead, the firm been overwhelmed by repeated lapses in oversight, including major hits from the collapse of Greensill Capital and the Archegos turmoil. The blow ups have left analysts asking whether Credit Suisse has a systemic problem in risk management, and investors facing another quarter of losses.

Credit Suisse is the worst-performing major bank stock in the world so far this year as a strong start for its investment bank business was overshadowed by the bank’s exposure to Greensill and Archegos.

A $140 million collateralized loan to the trade-financier Lex Greensill’s firm is now in default, although $50 million has been recently repaid by the administrators. A $10 billion group of funds that the asset management unit ran with Greensill are being unwound.

Before the final hit from that affair could be tallied, executives had to turn to the impending hit from the meltdown of Bill Hwang’s Archegos. The loss from Hwang’s opaque, leveraged transactions could run into the billions, according to people familiar with the matter. Collectively, banks total hit from Archegos trades could be up to $10 billion, JPMorgan analysts have estimated.

Additional Scrutiny

The two crises from the past month has brought additional scrutiny on Warner, coming after a long line of other miscues at the investment bank and beyond. From exposure to the Luckin Coffee Inc. fraud to a $450 million impairment on a stake in York Capital Management, the ongoing damage to the lender’s reputation has upped scrutiny on management.

2021-04-04 10:01:04

Credit Suisse