A sort ofntónio Horta-Osório tried to cheer up: “We are determined to learn the right lessons and expand our control functions so that we can be in a better position in the future,” said the new Credit Suisse chairman (CS) Record on Thursday. The reason why the Portuguese promised to create a better future for the major Swiss banks was to submit an investigation report on the fiasco around Archegos. In the first half of 2021, the business with this New York casino brought a loss of 5 billion francs to CS.
Many other banks also sneered at Archegos’s so-called premium service business. However, the Swiss provided Bill Huang, the owner of Archegos, with billions of dollars in loans for his bold stock market bets, causing the biggest loss to date. When these serious errors occur, CS will suffer the aforementioned losses due to lack of adequate coverage.
A US law firm reviewed the case on behalf of the CS board of directors. CS’s 172-page report released on Thursday provided the bank with devastating testimony: “CS’s Archegos-related losses are the result of a fundamental failure in the management and control of CS Investment Bank, especially its main services. Commercial. The transaction. The aim is to maximize short-term profits and does not reduce Archegos’ willingness to take risks, which makes it possible.” The auditor said that there are many warning signs that Archegos’s concentrated, volatile, and very low-profit swap positions could be a disaster Sexually poses a risk to CS. But these signs did not attract people’s attention, “although there is evidence that some people have raised their concerns in an appropriate way.”
Archegos crash “unacceptable”
According to the auditors, there was no malicious or fraudulent intention behind the failure. There is obviously nothing to complain about the basic structure of the risk control and risk system. The problem is that the employees involved did not follow the existing rules and guidelines. The report mentioned that “CS’ risk culture has major flaws.” In its evaluation of the investigation report, the bank talked about the “insufficient performance of regulatory obligations” in investment banking and risk management. The auditor recommended that CS develop a corporate culture, “in this culture, all employees at all levels see themselves as risk managers, responsible for identifying, responding, and escalating risks, and being strictly responsible for failing to perform their risk management tasks.” .
CS Chief Executive Thomas Gottstein (Thomas Gottstein) condemned Archegos’ failure as “unacceptable.” He himself only found out when the media reported the case. The Swiss said in a conference call with reporters that he didn’t even know Archegos existed until then. He is now responsible for drawing the necessary conclusions. At the same time, investment banking risks have been significantly reduced, and the risk system has been further improved and strengthened.
Nine employees had to contact Archegos, including risk director Lara Warner. The 23 employees involved have now missed $70 million in bonuses. The case clearly stated that “we must deal with our corporate culture,” the bank wrote. This is a new discovery: A year and a half ago, when Gottstein was promoted to the top of CS after an internal espionage incident, he asserted that the company culture was good and strong.
Due to the additional depreciation associated with Archegos, CS’s net profit fell 78% in the second quarter to 253 million francs. In terms of asset management, the net outflow of client funds was 4.7 billion Swiss francs. Some customers in Asia have parted ways, which is said to make sense. In fact, the decline may also reflect a certain reputational loss, especially because CS also caused many customers’ troubles with its Greensill supply chain financing fund.
