Credit Suisse is considering replacing the risk chief in the looming driver

Members of Credit Suisse Group AG are discussing the replacement of chief risk officer Lara Warner while saving chief executive Thomas Gottstein because they could lose billions in losses due to the collapse of Archegos Capital Management, according to people who was informed about it.

The bank will keep investors informed of the demise of Archegos, including the plight of top executives such as investment bank chief Brian Chin, two people said. They also said that the Swiss firm is planning a review of its main brokerage firm, which is located in the investment bank.

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

A spokesman for Credit Suisse declined to comment.

Read more: How Credit Suisse strikes for an amazing loss that amounts to billions

JPMorgan Chase & Co. analysts estimate that the Swiss bank no. 2 as one of the biggest potential losers in the Archegos crash, which could cost banks $ 10 billion. This came a few weeks after the collapse of Greensill Capital, a fundraiser that managed funds that Credit Suisse offered to its asset management clients.

The one-two-stroke credit Suisse has achieved the largest bank shares 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 office in New York. .

The bank’s 1.5 billion Swiss franc ($ 1.6 billion) purchase program is in danger of being disrupted for the second time – after only being halted last year with the start of the pandemic – and could put losses on dividend payments farm. S&P Global Ratings downgraded its outlook for the bank to negative from stable, indicating concerns about risk management.

According to JPMorgan, Credit Suisse’s capital position will come under pressure as a profit of more than $ 5 billion. Swiss regulator FINMA has increased Credit Suisse’s requirements under its Pillar 2 buffer, after the bank warned it could suffer a loss due to the abolition of the financial funds linked to Greensill.

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

Thomas Gottstein, Chief executive officer

The surprising choice to take over in February 2020 after an espionage scandal driven by Tidjane Thiam led Gottstein, previously the bank’s business in Switzerland. When he got the job, he declared that it was ‘time to look ahead’, but Credit Suisse’s problems have only metastasized since then.

First, there was a write-off of $ 450 million on the bank’s stake in hedge fund York Capital, and the costs associated with a long-standing lawsuit in residential mortgage securities.

Then Greensill’s finance business inflated in the supply chain. The board and regulators are investigating how Credit Suisse’s supply chain financing funds, linked to the Greensill business, were sold to investors, including its own clients for wealth management, and how the bank manages conflicts of interest and its business relationship. with Greensill, Bloomberg News reported.

The Archegos episode raises questions about dealing with risk management, especially since one of its first major initiatives was the merging of the risk and compliance division to streamline risk decision-making.

“Risk control is still not where it should be,” Herro said. “Hopefully, it’s a wake-up call to expedite the cultural change needed in this enterprise.”

Lara Warner, Chief Risk and Compliance Officer

With dual Australian-American nationality and a career ranging from equities analyst to chief financial officer of investment banking, Warner has followed a less traditional path than many of her peers to the highest level of risk management and Credit Suisse’s executive board. She was the highest-ranking member of Thiam’s inner circle to win a place in Gottstein’s top ranks. Her promotion of the head of risk and compliance was the conversion in which the two units were combined.

She faces the same difficult questions as Gottstein about risk management practices and culture after her personal involvement in signing a loan to Lex Greensill in October.

In an area of ​​banking run primarily by men with risk models, her more business-based approach has not always declined 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 stayed, according to people who worked for her, were challenged to get more involved with the business.

“To make the good bits of Credit Suisse flourish, you have to get rid of the bad bits, and that’s the risk control that has plagued this company for most of a decade,” Herro said.

Brian Chin, Investment Bank CEO

Along with Warner, Chin was a big winner in Gottstein’s upheaval last summer, when the chief trading officer also took control of the investment bank following a merger of the two units.

Its advancement – at least in part – was due to a turnaround in world market prosperity during the latter part of Thiam’s era. Now his business is under tremendous pressure due to the losses of Archegos.

Delegates from several of the world’s leading brokerages tried to ward off the chaos before the drama was seen in public last Friday. According to Credit Suisse, it was according to people with knowledge of the matter to come to a halt to find out how to relax positions without causing panic.

The strategy failed, which led banks to start selling. Credit Suisse and Nomura issued profit warnings on Monday. Later in the day, Gottstein and Chin made a call with shocking executives and other executives where they said the moneylender was still figuring out the size of the hit and told bankers it was time to to pull together and not focus on the potential. impact on payment.

Paul Galietto, head of stock trading

Galietto joined Credit Suisse in 2017 after a stint at UBS Group AG and a career at Merrill Lynch & Co. in two decades. He managed Credit Suisse’s first brokerage unit before trading the leader of the equities division two years ago.