Swiss banking giant Credit Suisse is eyeing a $250 million boost to its annual revenue by tweaking its risk calculation. The company said on Wednesday that it could earn this extra money by garnering higher net interest income. It would be made possible by calculating its risk-weighted assets in US Dollars. The company previously used Swiss Francs for making the calculation.
What is the change all about?
The Zurich-based banking behemoth used Swiss Francs to calculate the Group Operational Risk weight-weighted assets. However, now it would use US dollars to ensure that it calculates risks adequately in the currency where they originate. FINMA, the Swiss market supervisor has already approved the change, and the bank will start enacting the same in the fourth quarter of the year.
The bank released a statement, writing,
“This is expected to result in an increase in the group’s annual net interest income, with an initial contribution expected in the fourth quarter of 2019. “The increase in net interest income will be hedged over at least a two-year period.”
With the new hedging strategy in place, Credit Suisse expects that its $250 million annual surplus will be providing RoTE benefits equivalent of 50 basis points.
Moving on from the damage
The Swiss bank has been facing rough times in recent years and looked at Tidjane Thiam to help turn around its fortunes. The desperate attempts at the company to bring in profit led to their traders engaging in risky behaviors in the market. Eventually, trading conditions became worse, and the company was forced to hand pink slips to thousands of employees.
Thiam did what was expected of him, and within one year of joining as Credit Suisse CEO, he helped in driving their focus away from investment banking to wealth management. Unfortunately, wealth management has become another headache for the company. Pierre-Olivier Bouee, their COO resigned this Tuesday over a growing scandal in the division.
It all happened with Iqbal Khan, the head of wealth management at the company left and Bouee ordered Credit Suisse head of security services to investigate him. Bouee reportedly wanted to know if Khan is poaching clients and employees from the company. Khan confronted a spook and lodged a criminal complaint. Meanwhile, a security expert involved in the investigation died, turning things even messier.
While Credit Suisse chairman has denounced the corporate investigation, it is unlikely that the bank will get rid of the problem soon since the Justice Department is also involved in the process.
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