Credit Suisse Reorgs Risk, Compliance

The mildly troubled investment bank Credit Suisse is consolidating its risk and compliance functions into one unit, which will be headed by the bank’s chief risk officer. Its chief compliance officer has been shifted into a new role overseeing sustainability research. 

Credit Suisse announced the shakeup Thursday while reporting second-quarter 2020 financial results. The results themselves were actually pretty good, considering the pandemic: pretax profits up 19 percent from Q2 2019, provisions for loan losses down from what the bank had booked in Q1. 

Still, new CEO Thomas Gottstein is looking to cut costs by about $430 million annually. So aside from the numbers, the bank also announced a restructuring plan that will combine separate risk and compliance functions. 

The new unit will be headed by Lara Warner. Warner has been chief risk officer at the bank since February 2019, and had been chief compliance and regulatory affairs officer for four years before that. She’s been with Credit Suisse since 2004. 

Meanwhile, Lydie Hudson had succeeded Warner as chief compliance and regulatory affairs officer, when Warner moved into that CRO role. Now Hudson is shipping out to be CEO of the bank’s newly created sustainability, research, and investment solutions unit. Hudson has been with Credit Suisse since 2008.

So what exactly will Warner do in her new role as chief risk and compliance officer? The bank published a statement about its restructuring plans that breathlessly touted a few bullet points:

• Build on existing progress in the Second Line of Defense organizations to further enhance the effectiveness and efficiency of our control environment amid stricter regulatory frameworks
• Less complex operating model to reduce fragmentation, eliminate duplication, improve coordination and allow for faster decision making
• Enhance scalability of technology and data platform through further investments
• Enhance effectiveness of control 

In other words, Credit Suisse is going to scrape over its risk and compliance operations to cut costs. Perhaps that’s a worthwhile effort, since regulatory compliance and operational risks are rapidly converging into one messy thing that can’t be managed well as two separate silos.

Then again, in my experience cutting costs is rarely a fun experience, and on the far side of things doesn’t reap nearly as much benefit as people first hoped. We shall see how this goes. Warner certainly seems to have the chops to do the job; here’s hoping lower-level staff survive the restructuring OK.

On the other hand, Credit Suisse’s restructuring plan also talked up sustainability as a big part of its growth strategy going forward — so Hudson landing there seems like a nice move, too. The bank wants to expand its sustainable financing business, while moving away from oil & gas investments. It will need sustainability research and products to offer clients to achieve those objectives, and Hudson is now head of the unit that’s supposed to deliver such research and products. A compliance officer could do worse with his or her career moves.

And since we’re talking about an investment bank, let’s get to the obligatory discussion of regulatory trouble and strategic missteps. 

CEO Gottstein is successor to previous chief executive Tidjane Thiam. Thiam was defenestrated by the board in February after allegations that some senior Credit Suisse executives were spying on other executives — like, hiring goons to tail people on the street — who were leaving the bank for other employers. So right there, Credit Suisse qualifies as “conductly challenged.” 

The bank has also been involved in deals with Wirecard, outrageous accounting fraud in Germany; and Lucklin Coffee, outrageous accounting fraud in China. Several other mini-scandals aren’t even worth mentioning here. 

So no matter what, Credit Suisse has plenty of ethics, risk, and compliance work that needs attention. Here’s hoping Warner hits the ground running.