Credit Suisse to add derivatives contracts to "Strategic Resolution Unit"

As part of its ongoing restructuring plans, Credit Suisse has added assets from its equity derivatives and prime services business into its "Strategic Resolution Unit" (SRU), a unit which is focused on the offloading of unwanted assets, as it looks to reduce its capital requirements and meet leverage ratio rules. It has also moved assets from its macro, credit, securitised products and emerging markets businesses. Last October, Credit Suisse created the SRU to oversee the wind-down of assets that did not fit its "strategic direction". 

Credit Suisse has added assets from its equity derivatives and prime services business into its “Strategic Resolution Unit” (SRU), a unit focused on the offloading of unwanted assets, as the new CEO continues to shrink the investment bank.

According to Credit Suisse’s earnings release last week, the bank transferred the assets to its SRU in a bid to reduce its capital requirements and meet leverage ratio rules.

As well as assets from the equity derivatives and prime services unit, it moved assets from its macro, credit, securitised products and emerging markets businesses.

“We also have some exposures relating to the resizing of the investment bank. For example, in the Global Markets division, additional transfers to the SRU include derivatives and loan portfolios for macro, global credits, securitised products, emerging markets, derivatives, and prime services,” said David Mathers, chief financial officer, on Credit Suisse’s earnings call last week.

The Swiss-bank created the SRU in October last year to oversee the wind-down of assets that did not fit its “strategic direction”. According to its earnings presentation, the exit strategy for the assets will include portfolio sales, unwinds, restructuring, clearing and compression initiatives.

The plan comes as Barclays agreed to sell its “non-core” derivatives portfolio, which consisted mostly of vanilla interest rate swaps, to JP Morgan.

Last week, Credit Suisse reported a pre-tax loss of CHF1.1 billion for the SRU in the fourth quarter of last year. In its earnings release, the bank said its anticipates a further CHF 1.3 billion in restructuring charges and SRU exit costs in the next 12-18 months. Credit Suisse reported “lower revenues in derivatives reflecting a slowdown in client activity.”

The move from the bank is the latest as it looks to considerably restructure and shrink its investment banking operations. In October it announced it would quit as a primary dealer for government bonds in all European markets. Furthermore, last month Credit Suisse completed the transition of its London-based prime brokerage business to Dublin.

However, Credit Suisse is not the only bank undergoing radical changes in the face of steep losses. Deutsche Bank also witnessed significantly lower revenues from trading equity derivatives, marking the second straight quarter of problems in that business.

The bank said in its quarterly earnings release it was hurt by “lower client activity exacerbated by challenging risk management in certain areas.”