By Brenna Hughes Neghaiwi
ZURICH (Reuters) – Credit rating agency Moody’s on Tuesday downgraded some of Credit Suisse’s
Switzerland’s second-largest bank was forced to wind down $10 billion in funds linked to collapsed supply chain finance firm Greensill and then suffered billions in losses after family office Archegos imploded.
“As indicated by similar cases in the past, the investigation and remediation of these matters will likely consume a significant amount of bank resources and managerial focus and take time to resolve, during which CS will remain vulnerable to the aforementioned risk factors,” the rating agency said.
Credit Suisse declined to comment.
S&P and Fitch earlier this year both revised Credit Suisse’s outlook to negative following the Archegos and Greensill scandals.
Moody’s on Tuesday downgraded its long-term senior unsecured debt and deposit ratings of Credit Suisse AG by one notch to A1 from Aa3, pointing to deficiencies in the bank’s risk management.
Credit Suisse AG is a sub-entity that houses the bank’s main operations, including its investment banking and wealth management businesses.
A framework revision had also reduced Moody’s view on Credit Suisse AG’s capacity to absorb unexpected losses, the rating agency said.
Moody’s affirmed Baa1 ratings on long-term senior unsecured debt for the Credit Suisse Group as a whole, and said the outlook for Credit Suisse’s ratings was now stable.
The rating agency also said it expected the bank to be able to contain further possible reputational effects and did not expect strategic adjustments to meaningfully impair Credit Suisse Group’s ability to deliver on mid-term profitability goals.
Nonetheless, the agency highlighted potential additional financial strains from the Archegos and Greensill matters, and the potential for client defections and franchise impairment as cause for concern in its downgrade of Credit Suisse AG.
“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,” Moody’s said.
“In addition, the final financial and reputational implications of the aforementioned events for CS also remain unclear.”
(Reporting by Brenna Hughes Neghaiwi; Editing by Riham Alkousaa, John Revill and Jane Merriman)
