Credit Suisse Group AG leaders are discussing replacing chief risk officer Lara Warner after a string of miscues at the bank led to losses potentially totaling billions of dollars, according to people briefed on the matter.
The bank is expected to give investors an update on the impact of its exposure to the collapse of Archegos Capital Management and the fallout for Warner and other top executives this week, said the people, who asked not to be identified describing private plans. Chief Executive Officer Thomas Gottstein is expected to stay on, the people said.
Another executive whose role is under scrutiny is Brian Chin, CEO of its investment bank, two of the people said. They also said the Swiss firm is planning a review of its prime brokerage business, which is housed under its investment bank.
A Credit Suisse spokesperson declined to comment.
Gottstein took over in February 2020 in the wake of a spying scandal that took down his predecessor and pledged a clean slate for 2021 after legacy issues marred his first year. Instead, the firm has been overwhelmed by repeated lapses in oversight, including major hits from the collapse of Greensill Capital and the Archegos turmoil. The blow ups have left analysts asking whether Credit Suisse has a systemic problem in risk management, and investors facing another quarter of losses.
Credit Suisse is the worst-performing major bank stock in the world so far this year as a strong start for its investment bank business was overshadowed by the bank’s exposure to Greensill and Archegos.
A $140 million collateralized loan to the trade-financier Lex Greensill’s firm is now in default, although $50 million has been recently repaid by the administrators. A $10 billion group of funds that the asset management unit ran with Greensill are being unwound.
Before the final hit from that affair could be tallied, executives had to turn to the impending hit from the meltdown of Bill Hwang’s Archegos. The loss from Hwang’s opaque, leveraged transactions could run into the billions, according to people familiar with the matter. Collectively, banks total hit from Archegos trades could be up to $10 billion, JPMorgan analysts have estimated.
The two crises from the past month has brought additional scrutiny on Warner, coming after a long line of other miscues at the investment bank and beyond. From exposure to the Luckin Coffee Inc. fraud to a $450 million impairment on a stake in York Capital Management, the ongoing damage to the lender’s reputation has upped scrutiny on management.
The bank’s 1.5 billion Swiss franc ($1.6 billion) share buyback program is at risk of being paused for the second time -- after first being stopped at the onset of the pandemic last year -- and losses could put pressure on the bank’s dividend distribution. S&P Global Ratings downgraded its outlook for the bank to negative from stable pointing to risk management concerns.
A larger than $5 billion hit to profit would start to put pressure on Credit Suisse’s capital position, according to JPMorgan. The Swiss regulator FINMA increased Credit Suisse’s requirements under its Pillar 2 buffer, after the bank warned it could incur a loss from winding down of the supply-chain finance funds.
In his first reshuffle last year, Gottstein elevated Warner to head both risk and compliance. The promotion made her perhaps the bank’s most senior female executive, and buttressed the chief risk officer role Tidjane Thiam had given her in 2019, with a remit to clean up legacy issues. She joined Credit Suisse as an equity analyst in 2002 and held several senior research roles until she became chief financial officer and chief operating officer for the investment-banking unit in 2010.
Along with Warner, Chin was a big winner in Gottstein’s shakeup last summer, when the trading head also won control of the investment bank after a merger of the two units.
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