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April 23, 2021

Credit Suisse plans to raise $1.9bn to contain Archegos losses

By Amala Johney

Credit Suisse is reportedly set to raise $1.9bn from investors as it looks to rebuild its balance sheet in the aftermath of a $4.7bn hit from the collapse of Archegos Capital.

The Swiss investment bank will sell 203 million convertible notes to existing shareholders in a bid to raise its common equity tier 1 ratio from 12.2% to 13%.

It has also decided to cut down lending in the hedge fund arm by a third to mitigate losses.

Earlier this week, it was reported that Credit Suisse’s prime-brokerage co-heads John Dabbs and Ryan Nelson are leaving the firm over the Archegos fallout.

The people departing also included investment bank CEO Brian Chin and chief risk and compliance officer Lara Warner.

The bank also nixed executives’ bonuses and reduced its dividend by two-thirds to CHF0.10 per share after the Archegos hit.

The Archegos saga increases troubles for Credit Suisse, which was struck by the collapse of British financial services firm Greensill Capital.

In Q1 2020, the Swiss bank reported a net loss in Q1 2021 driven by the Archegos hit that offset growth across wealth management and investment banking.

Finma’s enforcement proceedings

Meanwhile, Swiss financial regulator Finma has launched enforcement proceedings against Credit Suisse in connection to the Archegos collapse.

In March, the Swiss watchdog announced a probe over the bank’s Greensill losses and the corresponding supply chain finance fund.

Finma will investigate issues of risk management related to both cases.

Finma said in a statement: “As a result of these two cases, FINMA has in recent weeks ordered various short-term measures to be put in place. These include organisational and risk-reducing measures and capital surcharges as well as reductions in or suspensions of variable remuneration components.

“These precautionary and temporary measures are intended to complement and reinforce steps already taken by the bank.”

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