'Second Lehman Crisis' Domino Effect of Senior Executive Departures at Credit Suisse

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Yujin Cho] A domino effect of key executive resignations continues at Credit Suisse, a global investment bank embroiled in rumors of a financial soundness crisis. As senior executives with tenure as long as 25 years leave the company one after another, fears of a second Lehman Brothers collapse are spreading.

On the 12th (local time), Bloomberg reported that Credit Suisse has lost two top executives overseeing the Greater China and Italy regions. Carsten Store, Credit Suisse's Asia-Pacific Chief Executive and Chairman of the Greater China region, announced his intention to resign effective the 15th.

He is also the chairman of the board of directors of Credit Suisse's Hong Kong banking and securities firms, and Bloomberg reported that he would be the highest-ranking executive among those recently departing the Greater China region. Store joined Credit Suisse in 1994, briefly left the company for three years, and rejoined in 2016. With a tenure of 25 years, he led business expansion across investment banking (IB) and asset management in the Greater China region, including China, Hong Kong, and Taiwan.

The news agency cited anonymous sources saying that Andrea Donzelli, CEO responsible for the Italy region, will move to Jefferies Financial Group in the first quarter of next year. CEO Donzelli has overseen the IB and equity market sectors in Italy.

Previously, the head of the securities firm in the Spain branch and executives in the Asia region left the company one after another. Foreign media predict that the domino effect of executive departures will continue as competitors competitively recruit Credit Suisse's veteran personnel.

Credit Suisse's financial soundness deteriorated during the COVID-19 bubble period, and last year it was hit hard by the margin call incident and tax evasion scandal involving Korean-American investor Bill Hwang's Archegos Capital. The margin call incident resulted in losses exceeding $5 billion, and due to worsening performance, the company recorded losses for four consecutive quarters through the third quarter of this year. A loss of approximately $1.6 billion is also forecasted for the fourth quarter.

Amid worsening performance and liquidity shortages, Credit Suisse initiated a high-intensity restructuring that cut one-third of the IB division's workforce, reducing about 40% of research personnel in China during this process.

Pessimistic forecasts interpreting the crisis rumors of Europe's largest investment bank as a harbinger of disaster in the global financial market are emerging. On U.S. stock online communities and social media, posts fueling Credit Suisse crisis rumors have spread. On Reddit, the origin of the Wall Street-shaking 'GameStop short squeeze' incident, posts comparing Credit Suisse to Lehman Brothers, which triggered the 2008 global financial crisis, have appeared.

As crisis rumors spread market anxiety, bank runs continued. From the end of September to mid-November, customer deposits amounting to approximately $88.3 billion (about 119 trillion won), equivalent to about 6% of total deposits, were withdrawn over 43 days. The Wall Street Journal (WSJ) reported that fund outflows were particularly notable in asset management for the super-rich, the company's core business area, with $66.7 billion withdrawn.

Credit Suisse plans to urgently inject capital by issuing new shares worth $4 billion, but concerns have been raised that if self-help measures such as asset sales are not implemented as planned, the $4 billion capital increase may not be sufficient.

This content was produced with the assistance of AI translation services.