Credit Suisse to revise its risk management after Archegos and other scandals

A sign over the entrance to the Credit Suisse Group AG headquarters in Zurich, Switzerland, on Monday, November 1, 2021.

Thi My Lien Nguyen | Bloomberg | Getty Images

Credit Suisse has vowed to continue its risk management and compliance review in the face of a string of scandals, despite what the CEO called a “challenging” environment.

The embattled Swiss lender will hold an Investor Deep Dive event on Tuesday, detailing priorities and progress to date in reforms across risk, compliance, technology and operational functions, along with its asset management business.

Credit Suisse warned earlier this month that it is likely to post a loss for the second quarter as the war in Ukraine and monetary policy tightening put pressure on the investment bank.

It comes after a series of scandals and accidents at the bank in recent years. It reported a net loss for the first quarter of 2022 as it continued to struggle with litigation costs related to the collapse of the Archegos hedge fund.

The bank suffered heavy losses in the wake of the collapse of US hedge fund Archegos Capital as it severed ties with the troubled family office.

“Despite the challenging market environment, we remain firmly focused on executing our strategic plan during the transition year 2022 and on strengthening our risk culture – crucial, while staying close to our customers,” said Thomas Gottstein, CEO of Credit Suisse in a statement. forward. from Tuesday’s investor event.

“At the same time, we continue to drive the bank’s digital transformation, which is essential to building a robust, scalable and agile organization that is ready for the future.”

In its presentation to investors, the bank outlined how Archegos’ collapse exposed weaknesses in its risk management, where “the sustainability of results diverged from historical performance”. It also detailed how it recalibrated its overall risk profile to reduce exposure to higher risk areas of the market.

Credit Suisse also came up with plans to deliver 200 million Swiss francs ($209.1 million) in cost savings in each of the years 2022 and 2023 by leveraging technology, with another 400 million francs in the medium term.

The litany of scandals has led some shareholders to call for a change in leadership just two years since Gottstein took over from former CEO Tidjane Thiam, who stepped down after a lengthy spy story.

However, chairman Axel Lehmann told CNBC in May that CEO Thomas Gottstein has the board’s full support to continue with the “rebuild” of the company.

Meanwhile, Credit Suisse and a former employee were found guilty Monday by the Swiss Federal Criminal Court for failing to prevent money laundering by an alleged Bulgarian cocaine smuggling ring between 2004 and 2008. The trial was the country’s first criminal proceeding against one of its most important banks.