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Leaders at Credit Suisse Group AG are discussing replacing chief risk officer Lara Warner after a series of mistakes at the bank led to losses totaling billions of dollars, according to people briefed on the matter.
The bank is expected to provide investors with an update on the impact of its exposure to the collapse of Archegos Capital Management and the consequences for Warner and other top executives this week, said the people, who asked not to be identified when describing the private plans. CEO Thomas Gottstein is expected to remain in office, the people said.
Another executive whose role is under scrutiny is Brian Chin, chief executive of his investment bank, two of the people said. They also said that the Swiss firm is planning a review of its main brokerage business, which is under its investment bank.
A Credit Suisse spokesperson declined to comment.
Gottstein took office in February 2020 in the wake of an espionage scandal that wiped out his predecessor and promised a clean slate by 2021 after inherited problems marred his first year. Instead, the company has been weighed down by repeated oversight failures, including major blows from the collapse of Greensill Capital and the Archegos turmoil. The explosions have 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 major bank stock in the world so far this year as a strong start for its investment banking business was overshadowed by the bank’s exposure to Greensill and Archegos.
A $ 140 million guaranteed loan to the signature of commercial funder Lex Greensill is now in default, although the servicers have recently repaid $ 50 million. A pool of $ 10 billion funds that the asset management unit managed with Greensill is unraveling.
Before the final blow of that affair could be counted, executives had to resort to the imminent blow of Bill Hwang’s Archegos collapse. The loss from Hwang’s leveraged and opaque transactions could run into the billions, according to people familiar with the matter. Taken together, the total impact of the banks by Archegos’ operations could until $ 10 billion, JPMorgan analysts estimated.
The two crises last month have brought additional scrutiny on Warner, after a long list of other mistakes at the investment bank and beyond. From exposure to Luckin Coffee Inc. to a $ 450 million impairment in a stake in York Capital Management, continued damage to the lender’s reputation has increased management scrutiny.
The bank’s 1.5 billion Swiss franc ($ 1.6 billion) share buy-back program is at risk of being paused a second time, after it was stopped for the first time at the start of the pandemic last year, and losses could pressure the bank’s dividend distribution. S&P Global Ratings downgraded its outlook for the bank to negative from stable, pointing to risk management concerns.
A more than $ 5 billion impact on earnings would begin to put pressure on Credit Suisse’s capital position, according to JPMorgan. Swiss regulator FINMA increased Credit Suisse’s requirements under its Pillar 2 cushion, after the bank warned it could incur losses from the liquidation of supply chain financial funds.
In his first remodeling Last year, Gottstein elevated Warner to the top of both risk and compliance. The promotion made her perhaps the bank’s most senior executive, and reinforced the role of chief risk officer Tidjane Thiam had given her in 2019, with a mandate to clean up legacy woes. She joined Credit Suisse as an equity analyst in 2002 and held various senior research positions until she became CFO and COO of the investment banking unit in 2010.
Along with Warner, Chin was a big winner in Gottstein’s reorganization last summer, when the commercial chief also gained control of the investment bank after the two units merged.
Read more about credit Suisse executives under scrutiny
– With the assistance of Ruth David and Marion Halftermeyer
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