Credit Suisse is weighing up the replacement of Risk Chief after abuses

Source: Credit Suisse Group AG

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Credit Suisse Group AG leaders are discussing the replacement of chief risk officer Lara Warner after a series of abuses at the bank resulted in losses totaling billions of dollars, according to people briefed on the matter.

The bank is expected to provide investors with an update on the impact of its exposure to the Archegos Capital Management collapse and the consequences for Warner and other top executives this week, the people said, who asked not to be identified by describing private plans. Chief Executive Officer Thomas Gottstein is expected to stay on, people said.

Another executive whose role is under scrutiny is Brian Chin, CEO of the investment bank, two of the people said. They also said the Swiss company is planning a review of its prime brokerage business, which has been placed with its investment bank.

A spokesperson for Credit Suisse declined to comment.

Gottstein took over in February 2020 in the wake of an espionage scandal that toppled its predecessor and promised a clean slate for 2021 after legacy troubles marred his first year. Instead, the company was overwhelmed by repeated review shortcomings, including major blows from the collapse of Greensill Capital and the turmoil in the Archegos. The eruptions left analysts wondering if Credit Suisse has a systemic problem in terms of risk management and that investors are again facing a quarter of the losses.

Credit Suisse is the worst performing share of the world’s major banks so far this year, as a strong start to the investment banking business was overshadowed by the bank’s exposure to Greensill and Archegos.

A $ 140 million collateralized loan to trade finance finance firm Lex Greensill is now in default, although $ 50 million was recently repaid by the trustees. A $ 10 billion pool of funds that the asset management unit co-managed with Greensill is being phased out.

Before the last hit of that affair could be counted, executives had to turn to the impending meltdown hit of Bill Hwang’s Archegos. The loss of Hwang’s opaque leveraged trades could run into the billions, according to people familiar with the case. Collectively, banks could be the total hit of Archegos transactions until $ 10 billion, JPMorgan analysts estimate.

Additional check

Last month’s two crises have brought Warner under scrutiny, following a long string of other abuses at the investment bank and beyond. From exposure to the Luckin Coffee Inc. fraud to a $ 450 million impairment on an interest in York Capital Management, the ongoing damage to the lender’s reputation has increased management control.