At a time when most of the investment banks have prospered, Credit Suisse has been battling one issue after another. The latest crisis — the collapse of its client Archegos Capital Management — has once again raised doubts about the lender’s capability to manage risks.

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The Credit Suisse management said that the Archegos Capital blow-up will cost the bank a loss of a staggering $4.7 billion. This comes close on the heels of the losses sustained at Greensill, a supply chain leader, which is in liquidation and at the same time in the middle of a political scandal. Credit Suisse said it will provide more information on losses sustained due to four Greensill funds in a few days, according to a report in The Guardian.

Changes in the management

The Swiss lender quickly swung into action, launching a major shakeup in its executive ranks. Brian Chin, CEO of Credit Suisse’s investment bank, and Lara Warner, the chief risk and compliance officer will step down from their posts, the bank has announced. Thomas Gottstein, the chief executive of Credit Suisse, said the Archegos loss was “unacceptable”, adding it and Greensill had led to “significant concern”.

Following one crisis after another, the bank now finds itself under tremendous pressure to persuade clients and shareholders to continue reposing faith in it while it attempts corrective measures.

The spying scandal

The financial blow-ups of Archegos Capital and Greensill are only the latest stories on the list of troubles that have battered the Zurich-based institution. In 2020 February, a spying scandal rocked the bank, resulting in the resignation of its then chief executive officer, Tidjane Thiam.

According to reports, in July 2019, it came to light that detectives followed an executive, who quit the bank for another institution. Similar reports resurfaced in December about another executive being followed. Thiam acknowledged the spying row had caused a disturbance at the bank and was replaced by Thomas Gottstein.

The Luckin collapse

Last year, at almost the same time, Credit Suisse was hit by the Luckin Coffee collapse in China after an accounting scandal. The company said its chief operating officer and some of its employees had colluded and fabricated about $310 million in sales, according to a Bloomberg report.

At the start of 2021, the lender was forced to write down $450m on its investment in hedge fund York Capital, reported the Financial Times.

What do analysts say?

Following the firm's decision to cut its dividend and suspend share buybacks, analysts at JPMorgan Chase & Co. stopped recommending the bank's stock, Bloomberg reported.

“The ongoing negative news flow could have an impact on the remainder of CSG’s businesses,” analysts Kian Abouhossein and Amit Ranjan wrote in a note. They lowered Credit Suess' rating to neutral from overweight.

Since the start of March, the share price of the firm has gone down by almost a quarter.

“The long-term implications remain unknown as credit-rating agencies take a dim view, regulatory scrutiny ramps up and clients potentially take business elsewhere,” FT quoted Thomas Hallett, an analyst at KBW, as saying.

(Edited by : Aditi Gautam)