Credit Suisse weighs in to replace the chief risk officer in the near future

Credit Suisse Group AG leaders are discussing the replacement of Lara Warner, the managing director, while relieving CEO Thomas Gottstein, while calculating the losses that could reach billions since the collapse of Archegos Capital Management, according to people informed about this matter.

The bank is ready to provide investors with an update on the consequences of Archegos, including the fate of top executives such as investment bank chief Brian Chin, two of the people said. They also said that the Swiss company is planning a review of its main brokerage business, which is at the investment bank.

“I think it’s unfair at this stage to put Mr. Gottstein,” David Herro of Harris Associates, one of the bank’s major shareholders, said in a Bloomberg TV interview last week. “He tried and tried to reorganize Credit Suisse, but Rome was not built in a day. Unless we see evidence to the contrary, I think he is the right person to continue to lead the organization. “

A Credit Suisse spokesman declined to comment.

Read more: How Credit Suisse prepares for staggering losses that could reach billions

Swiss Bank no. 2 is one of the biggest potential losers in the Archegos meltdown, which could cost banks a $ 10 billion collective, JPMorgan Chase & Co. analysts have estimated. This came just weeks after the collapse of Greensill Capital, a lender that managed funds offered by Credit Suisse to its asset management clients.

Point one or two made Credit Suisse the weakest performance of major banking stocks 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 family from New York. .

The 1.5 billion Swiss franc ($ 1.6 billion) share buyback program is likely to be discontinued for the second time – after it was first shut down at the start of the pandemic last year – and losses could put pressure. on dividend payments. S&P Global Ratings downgraded its outlook for the bank from negative to stable risk management concerns.

A $ 5 billion profit blow would begin to put pressure on Credit Suisse’s capital position, according to JPMorgan. The Swiss regulator FINMA has increased Credit Suisse’s requirements for the amortization of Pillar 2, after the bank warned that it could suffer a loss from the liquidation of Greensill-related supply chain financing funds.

Here are the Credit Suisse leaders who will be at the center of the action in the coming days and weeks:

Thomas Gottstein, Executive Director

The surprise choice to take over in February 2020, following an espionage scandal that ousted Tidjane Thiam, Gottstein previously ran the bank’s business in Switzerland. When he got the job, he said it was “time to look forward,” but Credit Suisse’s problems have only metastasized since then.

First, there was a $ 450 million reduction in the bank’s stake in the York Capital investment fund and the costs of a long-term legal case in residential mortgage-backed securities.

Then, Greensill’s supply chain financial business exploded. The Board of Directors and the regulators are examining how Credit Suisse’s supply chain financing funds, related to the Greensill business, were sold to investors, including its own wealth management clients, and how the bank handled conflicts of interest. and his business relationship with Greensill, Bloomberg News reported.

The Archegos episode raises questions about how it manages risk, especially since one of its first major initiatives was to merge risk and compliance divisions to streamline and improve risk decision-making.

“Risk controls are still not where they should be,” Herro said. “We hope this is a wake-up call to accelerate the cultural change that is needed in this company.”

Lara warner, Chief Risk and Compliance Officer

With dual Australian-American nationality and a career ranging from capital analyst to investment bank chief financial officer, Warner has taken a less traditional path than many of his colleagues to the highest levels of risk management, and on the executive board of Credit Suisse. He was the highest member of Thiam’s inner circle who won a place in the top ranks of Gottstein. Her promotion to the head of risk and compliance came in the reshuffle that saw the two units combined.

He faces some of the same tough questions as Gottstein about risk management practices and culture, following his personal involvement in signing a loan with Lex Greensill in October.

In a banking area run primarily by risk-averse men, her more business-oriented approach has not always gone well, according to conversations with about half a dozen current and former employees who spoke on condition of anonymity. Several left after she took over, while those who remained were challenged to get more involved in the business, according to people who worked with her.

“For the good parts of Credit Suisse to flourish, you have to get rid of the bad parts and this is the risk control that has affected this company for most of a decade,” said Herro.

Brian Chin, CEO of the investment bank

Along with Warner, Chin was a big winner in Gottstein’s shakeup last summer, when the chief transaction officer also gained control of the investment bank after a merger of the two units.

His promotion – at least in part – was due to a shift in wealth in global markets in the latter part of Thiam’s era. Now, his business is under intense pressure due to losses in Archegos.

Emissaries from several of the world’s largest primary brokerages tried to break away from the chaos before the drama went public last Friday. The idea of ​​Credit Suisse was to reach a kind of stalemate to find out how to relax positions without causing panic, according to people with knowledge about this issue.

This strategy failed, causing banks to start selling. Credit Suisse and Nomura issued profit warnings on Monday. Later in the day, Gottstein and Chin held a call with shocked executives and other executives, where they said the lender was still working to find out the size of the blow and told bankers it was time to unite and not focus. on the potential. impact on payment.

Paul Galietto, head of stock trading

Galietto joined Credit Suisse in 2017, after an internship at UBS Group AG and a two-decade stint at Merrill Lynch & Co. He headed Credit Suisse’s main brokerage unit before taking over the management of the stock trading division two years ago.