Swiss authorities investigating Credit Suisse for transaction losses

Geneva (AP) — Swiss financial market officials are considering possible penalties for Credit Suisse after top banks announced “significant losses” related to US-based hedge funds on Thursday. Said.

Authorities FINMA said Credit Suisse will need “various risk mitigation measures” and will investigate “potential shortcomings of risk management.” Authorities said they had appointed an outside agent to investigate the matter.

Two weeks ago, the bank announced that it was claiming CHF 4.4 billion ($ 4.7 billion) in connection with a default margin claim by US-based Archegos Capital. Credit Suisse did not identify only what is called a “US-based hedge fund,” but authorities did.

Authorities said such “execution procedures” for financial institutions usually take months, depending on the complexity of the matter. FINMA does not have the authority to impose fines, but it is possible to order changes and set restrictions within the financial institution.

Margin calls are triggered when an investor borrows a stock portfolio as collateral and needs to make up for the balance required by the bank when the stock price falls and the value of the collateral declines.

FINMA also confirmed that it filed a proceeding against a bank in March in connection with a so-called “supply chain finance fund,” a financial product reserved for some customers.

The bank announced on March 1 that it would redeem the fund and suspend its subscription due to bankruptcy issues related to its partner Greensil Capital.

FINMA’s announcement came shortly after Credit Suisse reported a net loss of CHF 252 million ($ 275 million) in the first quarter. This is mainly due to temporary billing.

CEO Thomas Gottstein said: “Due to this issue, the losses reported this quarter are unacceptable.” He referred to a procedure that included an independent investigation ordered by the bank. The bank also said two executives had left as a result of the trouble.

The bank said in a quarterly report that temporary claims offset “wealth management and the overall good performance of investment banks.”

Net sales were up 31% to CHF 7.57 billion ($ 8.3 billion), but pre-tax losses were CHF 757 million ($ 626 million), compared to a net profit of CHF 1.2 billion in the year-ago quarter. did.

Credit Suisse expects the market to return to “lower and more normal levels in the coming quarters” in its outlook, with hedging around CHF600 million ($ 655 million) in the second quarter. He said he expected the residual costs of. Funding trouble.

He said he closed 97% of the related positions related to hedge fund issues.