Credit Suisse Prime Brokerage co-bosses will leave the bank after losing Archegos

Credit Suisse CS -1.66%

The AG Group said two executives in charge of its main brokerage unit will leave after losing $ 4.7 billion in the collapse of the Archegos Capital Management hedge fund.

In an internal note on Monday, it was said that John Dabbs and Ryan Nelson will immediately resign as co-heads of the main services and will assist the bank until mid-May for an orderly transition.

Their departures come after Credit Suisse fired its risk officer and investment bank leader this month. Several other employees working in stocks and risk management also left.

Credit Suisse and other banks accumulated heavy losses when Archegos, a US family-owned investment firm, was unable to meet margin calls for large, equity-focused positions in late March.

Credit Suisse was slow to develop its positions compared to other banks and was left with the biggest loss. It has borrowed more from its size than other lending banks, The Wall Street Journal reported earlier.

In addition to staff departures, the bank launched an internal investigation into what did not work well. A focus of the investigation focused on the bank’s main brokerage unit, which managed the relationship with Archegos and allowed the investor to accumulate substantial leverage positions in individual shares.

Credit Suisse and other banks sold Archegos, which is known as full return swap, a type of contract that allows investors to have economic exposure to a share without holding the underlying shares or disclosing their public positions in the markets.

Archegos and how he kidnapped the markets

Dabbs has worked for Credit Suisse since 2009. In 2018, Mr Nelson joined Crosstown rival UBS Group AG. Together, they led a shift in the first brokerage business, which involved focusing on fewer clients to improve profits. Credit Suisse says it is one of the top four major brokerages in the United States, based on industry rankings.

The primary brokerage units of banks serve hedge funds, helping them to make transactions, offering them credit and presenting them to foreign investors.

After revealing the $ 4.7 billion loss in Archegos on April 6, Credit Suisse cut its dividend to preserve capital, and CEO Thomas Gottstein said “serious lessons will be learned.”

Archegos’ problems came just weeks after another Credit Suisse client, Greensill Capital, collapsed, with which the bank managed a $ 10 billion set of investment funds. Credit Suisse says the costs of these funds and a loan to Greensill could be significant, but did not give a figure.

Credit Suisse reports first-quarter earnings on Thursday. In its April 6 statement, Credit Suisse said it expects to record a pretax loss of about $ 1 billion to reflect Archegos’ losses.

Write to Juliet Chung at [email protected] and Margot Patrick at [email protected]

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