Damage by Losses, Credit score Suisse Faces Reckoning Underneath New Chairman

Under the surface, however, risk problems remained: the departure of long-time bankers during his tenure had cost Credit Suisse valuable institutional knowledge, and the bank had built an increased eagerness to work with young talent like Luckin Coffee and Greensill.

Snowball scandals

In finance, risk management – the ability to consider a sometimes volatile mix of banking positions, market activity, assets and liabilities, and reputational and technology issues in order to anticipate potential losses – is a critical skill.

However, the bank’s approach is extremely technical, said Arturo Bris, professor of finance at IMD Business School in Lausanne, Switzerland. Excessive reliance on calculation can be a problem if those in charge do not take a holistic view.

“Most of these mistakes have a lot more to do with human error,” he said. “I don’t think they’re good risk managers.”

Consider the collapse of Archegos: The head of the risk broker who oversaw Credit Suisse’s business with Archegos had once handled the bank’s sales relationship with the company. Above him was a Chief Risk Officer with a background in finance and compliance – not risk.

Credit Suisse has blamed more than half a dozen executives for their recent stumbling blocks. The last day for Brian Chin, executive director of the investment bank, was Friday. Lara Warner, the Chief Risk and Compliance Officer, has already left. And then there was the departure of Mr. Gottschling, the chairman of the board’s risk committee, who did not propose re-election at the annual meeting.

Now Mr. Horta-Osório need to find out whether Credit Suisse can stabilize its investment bank with personnel changes or whether a more serious overhaul is appropriate.

If he wants to make big changes, he may need to move quickly.

“Shareholders and employees cannot wait months for a new strategy,” said Manuel Ammann, professor at the Swiss Institute for Banking and Finance at the University of St. Gallen. “You have to deliver quickly.”

Anupreeta Das contributed to the coverage.