Credit Suisse reports $275m net loss in Q1, FINMA investigates ‘Archegos’ and ‘Greensill’ cases

Rick Steves

As a result of these two cases, ‘Archegos’ and ‘Greensill’, the regulator has ordered various short-term measures to be put in place, including organizational and risk-reducing measures and capital surcharges as well as reductions in or suspensions of variable remuneration components.

The Swiss Financial Market Supervisory Authority (FINMA) has opened enforcement proceedings against Credit Suisse in the aftermath of the ‘Archegos’ blow-up.

The regulator will investigate Credit Suisse in the context of the significant losses resulting from the business relationship with the US hedge fund, formally known as ‘family office’, “Archegos”.

“FINMA will investigate in particular possible shortcomings in risk management. FINMA will appoint a third-party agent to investigate the matter at the bank. In addition, FINMA will continue to exchange information with the competent authorities in the UK and the USA”, said the official statement.

Credit Suisse today released its financial results for the first quarter of 2021, having reported a CHF 252 million ($275 million) net loss during Q1 2021. As expected, ‘Archegos’ was behind poor results for the quarter.

Thomas Gottstein, Chief Executive Officer of Credit Suisse Group AG, commented: “Our results for the first quarter of 2021 have been significantly impacted by a CHF 4.4 bn charge related to a US-based hedge fund. The loss we report this quarter, because of this matter, is unacceptable. Together with the Board of Directors, we have taken significant steps to address this situation as well as the supply chain finance funds matter.”

The bank reported 80% growth in its wealth management and investment banking businesses, up to CHF 3.9 billion in revenue.

As with the ‘Archegos’ blow-up, the ‘Greensill’ case serves as a risk management lesson

FINMA is not only investigating Credit Suisse for its role in the ‘Archegos’ meltdown. The financial watchdog also confirmed ongoing proceedings in “Greensill” case.

The Swiss regulator has opened proceedings against the bank in the context of the “Greensill” case and the corresponding supply chain finance funds in March 2021.

According to FINMA, such proceedings can be expected to take several months, particularly where complex international matters are involved. Until the conclusion, there will be no further comments by the regulator.

As a result of these two cases, ‘Archegos’ and ‘Greensill’, the regulator has ordered various short-term measures to be put in place, including organizational and risk-reducing measures and capital surcharges as well as reductions in or suspensions of variable remuneration components.

FINMA’s imposed precautionary and temporary measures are intended to complement and reinforce steps already taken by the bank, the regulator stated.

The Archegos saga led to the departure of the bank’s investment bank CEO and chief risk and compliance officer, and was preceded by a separate shakeup in the asset management division in the wake of the collapse of British supply chain finance firm Greensill Capital. Credit Suisse ran $10 billion in funds tied to Greensill.

Credit Suisse had pointed out that aside from the Archegos and Greensill scandals, it was on course for its strongest underlying quarter for a decade in terms of financial performance.

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