Credit Suisse settles shareholder risk exposure lawsuit at USD 32.5 Mn


Credit Suisse Group AG has reportedly resolved a USD 32.5 million lawsuit alleging that the Swiss bank misled stockholders about how well it managed risk, particularly its exposure to "high-risk" clients like Archegos Capital Management.

A preliminary settlement of the proposed class action was submitted to the U.S. District Court in Manhattan on Friday i.e., 16th September, and an approval is requested for the same by the judge.

Despite publicly professing a "core commitment" to managing its risk thresholds, risk oversight, and credit exposure, the bank was charged with playing a high-finance version of Russian roulette by letting hedge funds and other important clients make multi-billion-dollar bets with its credit.

According to court papers, Credit Suisse's "laissez-faire" strategy resulted in at least USD 5.5 billion of losses, including those from the failures of Archegos and UK-based Greensill Capital. As a result, shareholders suffered losses as the value of its American depositary shares fell.

When consenting to a settlement, the bank denied any wrongdoing and expressed satisfaction at the lawsuit's resolution in a statement.

It is noteworthy that Credit Suisse has designated 2022 as a "transition" year as it minimizes risk-taking and named restructuring specialist as well as well-known cost cutter Ulrich Koerner as CEO. In his new position, Koerner has been entrusted with conducting a strategic review of the bank, the findings of which will be made public on October 27 when Credit Suisse releases its third-quarter results.

Interestingly, the collapse of Archegos cost banks approximately USD 10 billion in losses and destroyed more than USD 100 billion in value for shareholders.

Moreover, ADR investors are covered by the settlement from October 29, 2020, to March 31, 2021, in the case where the Northern California Sheet Metal Workers Pension Plan was the primary plaintiff. Its attorneys want to pursue up to 27.5% of the settlement sum, or around USD 8.9 million, in legal expenses.

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