Credit Suisse Group AGs double-barreled financial crisis shares a typical theme: a bank that looked the other way when warning indications argued for drawing back on profitable corners of its service.
The Swiss bank with a huge Wall Street presence was caught off guard beginning in late February when $10 billion in complex financial investment funds it ran with financing company Greensill Capital unwinded, despite years of internal cautions about the relationship.
It lent more than other banks on big, focused positions to Archegos Capital Management, run by long time client Bill Hwang. Though Archegos was flagged as a customer of special interest, Credit Suisse acted more gradually than other banks, and wound up on the wrong side of a fire sale.
The bank said Tuesday it would take a $4.7 billion charge on the Archegos trade, comparable to more than a years worth of revenue. While it hasnt put a number on the Greensill damage, a preliminary evaluation inside the bank says losses to Credit Suisse investors may strike $1.5 billion, according to an individual knowledgeable about the bank.
In a declaration Tuesday, Credit Suisse Chief Executive Thomas Gottstein stated, “We are completely committed to attending to these situations. Major lessons will be discovered.”