Credit Suisse Revamps Its Investment and Private Banking Divisions

on Nov 20, 2012

On 20 November The Financial Times reported Credit Suisse (NYSE:CS) will be splitting off its investment bank outside Switzerland from its global private bank, Swiss investment operations and wealth management, in a bid to meet “the new regulatory reality”.

The bank is not planning lay-offs but will carry out an extensive management shuffle. Gael de Boissard will head the Investment Banking Division together with Eric Varvel. Mr Boissard will be responsible for the Fixed Income Department, while Mr Varvel will head equities and advisory. The newly created Private Banking & Wealth Management Division will be cooperatively run by Hans-Ulrich Meister and Robert Shafir. Mr Meister will retain his position as head of Private Banking in Switzerland, while Mr Shafir will manage Private Banking & Wealth Management Products and Private Banking in Americas.

According to Chairman Urs Rohner, the changes “will better align product development, advice and distribution and they will further reduce complexity across the bank for the benefit of all our clients and stakeholders,” Mr Rohner also added that the bank had already moved to a new capital regime and substantially decreased its risk-weighted assets, balance sheet size and expenses. Complexity in operations will be further reduced after the split.

Last month Credit Suisse announced it will be trimming a further $1.06 billion (£666 million) in annual costs by the end of 2015, adding to the $1.06 billion savings program already implemented in July and the $2.12 billion (£1.33 billion) trimming of expenses achieved in 2011. Chief Executive Brady Dougan declined to say how much the bank will manage to save by separating its investment and private banking divisions or how many jobs may be cut in the future.

As of 10.20 GMT the stock price of the bank had fallen 2.6 percent to 21.00 Swiss francs.
**Credit Suisse Under Threat of NY Lawsuit**
!m[The Bank Becomes a Target of Lawsuits for Mis-Selling Mortgage-Backed Securities](/uploads/story/859/thumbs/pic1_inline.png)On Tuesday the FT reported that the New York attorney-general Eric Schneiderman is preparing to file a lawsuit against Credit Suisse, raising allegations that the bank misled investors who lost more than $11 billion (£6.9 billion) after purchasing mortgage-backed securities. Mr Schneiderman is expected to accuse the bank of a lack of due diligence on the home loans it packaged into bonds and subsequently sold to its investors. Credit Suisse also allegedly failed to provide sufficient information to its clients regarding the lending practices of the loan originators it worked with.

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The attorney-general has jurisdiction across states and can act on behalf of all investors in the US. According to him, the Swiss bank pushed lenders into originating more loans, which led to bad lending practices. In some cases the bank allegedly sold mortgage-backed securities it knew were faulty and would lead to losses for its clients.
Last week Credit Suisse and JP Morgan supposedly reached a settlement with the Securities Exchange Commission (SEC) agreeing to pay a combined $417 million (£262 million) in exchange for the regulator dropping civil charges of selling risky mortgage bonds to investors.

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