Credit Suisse shakes up fund activity under Greensill regulation | Invest News
By Brenna Hughes Neghaiwi and Oliver Hirt
ZURICH (Reuters) – Credit Suisse is revamping its asset management business as it faces regulatory inquiries into its relationship with Greensill Capital, warning on Thursday that its results and its clients’ confidence could be affected by the collapse of the financial company.
Switzerland’s second-largest bank and its asset management arm reeling from implosion of around $ 10 billion in funds linked to UK supply chain financier Greensill, putting pressure on CEO Thomas Gottstein .
Credit Suisse said in its annual report that Swiss regulator FINMA is examining the issue and examining its impact against the bank’s so-called pillar 2 cushion, which is the capital that banks hold against risk.
“We can confirm that we have also imposed a pillar 2 cushion in this context as indicated by the bank in its annual report,” FINMA said, adding that it was in contact with other authorities.
Credit Suisse stuck to its capital guidelines and said plans to repurchase at least 1 billion Swiss francs ($ 1.1 billion) of shares this year are still relevant. .
The bank has appointed Ulrich Koerner as the new head of asset management and has announced that it will separate the company into its own division as of April 1. It is part of the international wealth management division headed by Philipp Wehle.
Credit Suisse’s annual report said some unidentified fund investors had threatened legal action in the Greensill case and the end cost could be “significant” to operating results.
“The portfolio manager has been advised that some of the notes underlying the funds will not be redeemed at maturity,” he added.
“We could also suffer reputational damage associated with these matters which could result in customer departures or loss of assets under management,” he said.
Vontobel analyst Andreas Venditti said the bank’s emphasis on the “strategic importance” of the asset management division meant that a sale of the company was unlikely.
The new structure goes against a trend of combining Credit Suisse products and services into a seamless offering to its high net worth clients. This, however, might help address suggestions that the model was amenable to internal conflicts of interest.
Credit Suisse shares gained 2.5%.
Koerner will return to Credit Suisse after his big rival UBS, where he most recently served as an advisor to the CEO from 2019 to 2020. He led UBS Asset Management from 2014 to 2019. Koerner was previously a senior executive at Credit Suisse Financial Services and has led the Swiss company.
Eric Varvel, current head of asset management, who is also chairman of Credit Suisse’s investment bank and director of its US holding company, will focus on his other functions.
Three senior asset management executives who helped oversee the Greensill funds have temporarily stepped down.
The annual report showed that bonuses for a number of senior executives concerned, “up to and including members of the management board”, had been suspended.
Asset Management lost 39 million Swiss francs ($ 42 million) pre-tax last year after heavy depreciation on an investment in a US hedge fund.
($ 1 = 0.9253 Swiss francs)
(Supplementary report by Rachel Armstrong and Abhinav Ramnarayan in London, written by Michael Shields; edited by Mark Potter and Alexander Smith)
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