Picking up the pieces of Bill Hwang’s Archegos Capital blowup: Credit Suisse weighs replacing risk chief in looming executive shake up

A hit to profit exceeding US$5 billion would start to pressure on Credit Suisse’s capital position, according to JPMorgan

The Swiss regulator FINMA increased Credit Suisse’s requirements under its Pillar 2 buffer

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Published: 1:45pm, 5 Apr 2021Updated: 3:53pm, 5 Apr 2021

Credit Suisse Group leaders are discussing replacing chief risk officer Lara Warner while sparing Chief Executive Officer Thomas Gottstein as they tally losses that could reach into the billions from the collapse of Archegos Capital Management, according to people briefed on the matter.

The bank is set to give investors an update on the Archegos fallout, including the fate of top executives such as investment bank chief Brian Chin, two of the people said. They also said the Swiss firm is planning a review of its prime brokerage business, which is housed in the investment bank.

“I think it is unfair at this stage to put this on Gottstein,” David Herro from Harris Associates, one of the bank’s top shareholders, said in a Bloomberg TV interview last week. “He attempted and has been attempting to reorganise Credit Suisse, but Rome wasn’t built in a day. Unless we see evidence to the contrary, I think he is the right person to continue to lead the organisation.”

A Credit Suisse spokesperson declined to comment.

The No. 2 Swiss bank stands as one of the biggest potential losers in the meltdown at Archegos, which could cost banks a collective US$10 billion, JPMorgan Chase analysts have estimated. That came just weeks after the collapse of Greensill Capital, a lender that ran funds Credit Suisse offered to its asset-management clients.

The one-two punch has made Credit Suisse 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 New York-based family office. The bank’s 1.5 billion Swiss franc (US$1.6 billion) share buy-back programme 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 dividend payouts. S&P Global Ratings downgraded its outlook for the bank to negative from stable poin,ting to risk management concerns.