Credit Suisse Group AG’s dual financial crisis has a common theme: a bank that looked the other way when warning signals pleaded to withdraw from lucrative corners of its operations.
The Swiss bank with a large presence on Wall Street was caught off guard in late February when $ 10 billion in complicated investment funds it managed with finance company Greensill Capital was unraveled, despite years of internal warnings about the relationship.
After that, it lent more than other banks in large, concentrated positions to Archegos Capital Management, run by longtime client Bill Hwang. Although Archegos was identified as a client of particular interest, Credit Suisse traded slower than other banks and ended up on the wrong side of a fire sellout.
The bank said on Tuesday it would cost $ 4.7 billion on the Archegos trade, which equates to more than a year in profit. While it has not provided a figure on Greensill’s damages, a preliminary assessment within the bank says the losses for investors in Credit Suisse could be $ 1.5 billion, according to a person familiar with the bank.
Thomas Gottstein, Credit Suisse’s Chief Executive, said in a statement Tuesday, “We are fully committed to addressing these situations. Serious lessons will be learned. “