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Credit Suisse is facing growing pressure from valued customers to compensate them for losses following the collapse of supply chain financing funds linked to Greensill Capital.
The decision to do so is one of the first major dilemmas facing new president António Horta-Osório in cleaning up the bank, which faces the threat of several collective lawsuits from angry investors.
More than 1,000 Credit Suisse customers invested in the $ 10 billion fund set, according to advisors and the bank’s marketing material reported that they were low-risk products, fully insured against losses.
However, the Swiss lender in March suspended the funds, which packaged the bills owed by Greensill customers on investment products. The bank’s customers could lose up to $ 3 billion after several of the companies in which they invested the debt funds that they could not pay or did not want to pay.
Friday, the UK’s serious fraud office opened an investigation to Sanjeev Gupta’s metal empire, which borrowed $ 1.2 trillion through Credit Suisse funds tied to Greensill. Last month the Financial Times revealed a series of suspicious invoices linked to Gupta’s business.
Among the funds invested are a former Qatari prime minister, hundreds of wealthy European and Asian customers of Credit Suisse, as well as pension funds and listed companies.
The inclusion in securities funds related to invoices pending issuance contravenes the funds ’rules and marketing material, investors reported to FT.
However, the bank’s lawyers are confident that the drafting of the fund’s documents alludes to the potential for investing in non-standard receivables, according to people on internal debates.
“It still irritates me not to clean up” and they recognize that they should compensate customers, said a wealthy person who personally invested in the funds and also runs a company that is a major counterpart to Credit Suisse. “The facts are pretty clear. There are no future bills.”
He added that he expected Horta-Osório to decide to indemnify his customers, in a repeat of his decision when the chief executive of Lloyds Banking Group reimbursed his customers for mis-sold payment protection insurance.
“Of course, it’s affecting my relationship with the bank,” the investor told FT. “Credit Suisse’s client advisers tell me ‘it’s not my fault’, they agree that senior management should have acted differently to try to maintain the relationship, but it has been irreparably damaged.”
According to Bloomberg, Sheikh Hamad bin Jassim Al Thani, former Prime Minister of Qatar, invested $ 200 million in Credit Suisse funds. Sheikh Hamad was the head of the Qatar Investment Authority when the sovereign wealth fund rescued Credit Suisse during the financial crisis and some of the bank’s lucrative clients are in the Gulf state. A representative of Sheikh Hamad could not be reached for comment.
Credit Suisse has declined to confirm whether participants in the funds will bear any losses, but has so far considered them to be professional investors aware of any risks.
Chief Executive Thomas Gottstein dit in March, the scandal “is, of course, first and foremost a major problem for fund investors in our supply chain” rather than the bank.
The debacle has also captured companies in which Credit Suisse is a major investor.
Quotient of the Swiss diagnostic company, which manufactures coronavirus testing kits, invested $ 110 million in supply chain funds, but said in a regulatory file that “these losses should be borne by Credit Suisse and not by the company or other fund investors.” Credit Suisse Asset Management is one of the five main shareholders of Quotient, with a 6% stake.
Nam Tai Property, a U.S.-listed Chinese company that invested $ 150 million in funds shortly after raising $ 170 million from a private emergency location last October, said it has sent a sues Credit Suisse and has filed complaints with the Hong Kong Securities and Exchange Commission Hong Kong Monetary Authority.
Senior executives are wary of compensating customers for fears that will weaken the bank’s insolvency hands and in possible legal proceedings against Greensill, according to people familiar with the matter.
They are also concerned that Finma, the Swiss financial regulator, will consider the decision to reimburse professional investors as a precedent and will force the bank to have more capital as a result.
The pressure comes as several lawsuits bringing together dozens of ultra-wealthy investors in the funds increase the pace in London and Zurich, including those prepared by Boies Schiller Flexner and Quinn Emanuel, two law firms that previously they were involved in lawsuits against the bank. .
Credit Suisse declined to comment.
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