Credit Suisse, a Switzerland-based investment bank, announced today that it is expecting heavy losses from the meltdown of a US-based hedge fund. Credit Suisse mentioned that it took a charge of approximately CHF 4.4 billion ($4.7 billion).
According to the official announcement, Credit Suisse is expecting a pre-tax loss of CHF 900 million ($960 million) in the first quarter of 2021. The bank mentioned that the recent hedge fund fiasco will negate the very strong performance that had otherwise been achieved by the Group’s investment banking businesses.
The bank added that it has made some executive changes in its investment banking division along with its compliance and risk division. The Switzerland-based financial services provider announced that Brian Chin, CEO of the Investment Bank, and Lara Warner, Chief Risk and Compliance Officer will step down from their roles.
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Commenting on the recent announcement, Thomas Gottstein, CEO of Credit Suisse Group, said: “The significant loss in our Prime Services business relating to the failure of a US-based hedge fund is unacceptable. In combination with the recent issues around the supply chain finance funds, I recognize that these cases have caused significant concern amongst all of our stakeholders. Together with the Board of Directors, we are fully committed to addressing these situations. Serious lessons will be learned. Credit Suisse remains a formidable institution with a rich history.”
Hedge Fund Losses
During the last week of March, Nomura and Credit Suisse issued warnings about the potential impact of hedge fund losses on the financial results of the companies. The shares of Nomura and Credit Suisse had dropped sharply following the announcement. Credit Suisse mentioned in its latest announcement that the Group’s Board of Directors has launched further investigations into the matter.
“We acknowledge that both the US hedge fund and the supply chain finance fund matters require substantial further review and scrutiny. The Board of Directors has launched investigations into both of these matters which will not only focus on the direct issues arising from each of them but also reflect on the broader consequences and lessons learned,” the official announcement states.