Of all the soul-searching Credit Suisse has done in the last couple of years, and there has been a whole lot of it, none can have been more baffling than trying to figure out how it could have unknowingly assumed so much counterparty risk with a single client that it then had to (allegedly) collude with its competitors to avoid taking a $5.5 billion hit, which it then failed to do, all the while not actually making any money on the trades that led to said series of unfortunate events. So, uh, it’s not going to do that sort of thing anymore.
Credit Suisse will… wind down the part of its investment bank that was responsible for more than $5 billion in trading losses related to the implosion of Archegos Capital Management earlier this year…. The decision to drop hedge-fund clients represents a retreat by Credit Suisse from a highly competitive Wall Street business, where it goes up against the likes of Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co. Credit Suisse managed accounts with more than 1,000 hedge funds, according to Preqin, a data firm.
It’s also going to keep a closer eye on things from HQ, which given what Credit Suisse bankers were able to get away with in the shadows seems wise.
A major feature of the reorganization is to unify the bank’s disparate power centers into a more unified structure, based in Zurich. Some of its recent regulatory and legal cases highlighted a lack of escalation by employees to higher-ups of brewing problems. Local units also pursued revenue growth without adequately considering business risks, according to reports commissioned by the bank and regulators.
“We have made some tough choices, like exiting prime,” CEO Thomas Gottstein said.
Uh, what exactly is so hard about not doing a thing that either makes you little to no money, or loses you 10 figures?
For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.