Credit Suisse’s main operation has been downgraded by ratings agency Moody’s in the wake of the twin crises of a $5.5bn hit from the collapse of Archegos Capital and its exposure to supply chain finance firm Greensill.
The ratings agency downgraded Credit Suisse AG, which houses its investment bank and wealth management units, to A1 from Aa3. Moody’s also reaffirmed the Swiss bank’s Aa1 senior unsecured debt ratings, it said in a 13 July statement.
The move from the ratings agency comes as Credit Suisse battles the fallout from a $5.5bn loss stemming from its prime brokerage unit as a result of its exposure to collapsed family office Archegos Capital, while also continuing to unravel its connections to Greensill.
The new rating could make it tougher for the Swiss bank to borrow at a crucial time, with new chairman António Horta-Osório currently reviewing options for potential strategic change.
Moody’s said the downgrade reflected “higher-than-anticipated risk appetite and deficiencies in [Credit Suisse’s] risk management and risk awareness and related control processes and frameworks” as a result of Archegos and Greensill.
It added that there was potential for further losses from the winddown of Credit Suisse’s positions in Archegos and possible client defections as a result of the reputational hit from the crises.
In its investment bank, Credit Suisse has been trying to stem defections of senior dealmakers during a boom period for the industry. It has now lost at least six bankers in Europe covering financial institutions, Financial News reported, and has offered ad hoc bonuses to senior bankers to convince them to stick around.
“Although Moody’s anticipates that CS will enhance its governance and risk management practices, including implementing the recommendations resulting from internal and external investigations, the extent and effectiveness of these measures will remain uncertain for some time,” the ratings agency wrote.
Separately, former UK prime minister David Cameron, who worked as an adviser for Greensill and lobbyed MPs on behalf of the firm, was paid $1m a year by the supply chain finance firm, the Financial Times reported on 13 July, citing people familiar with the matter.
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