Credit Suisse will recommend hedge funds and other clients of its prime services business to BNP Paribas as part of a referral agreement between the banks, after the Switzerland-headquartered group unveiled plans to shutter its prime brokerage operations following losses stemming from the collapse of Archegos Capital Management.
Credit Suisse will recommend hedge funds and other clients of its prime services business to BNP Paribas as part of a referral agreement between the banks, after the Switzerland-headquartered group unveiled plans to shutter its prime brokerage operations following losses stemming from the collapse of Archegos Capital Management.
Credit Suisse said on Monday it has signed a referral agreement with Paris-based BNP to support its Prime Services and Derivatives Clearing customers in their selection of alternative providers for such services “in order to ensure a smooth migration of their business, in the context of the recently announced exit from Prime Services activities.”
The Zurich-based group’s investment banking division will exit most of its Prime Services operations, with the exception of Index Access and APAC Delta One, from early next year, it said last week.
The withdrawal comes after the firm suffered significant losses as a result of Archegos Capital Management’s collapse in March this year.
Bill Hwang’s single family office back imploded after defaulting on a series of margin calls by several investment banks, including Credit Suisse. Archegos’ failure revealed a highly-concentrated, hugely-levered portfolio of stocks with exposures centred around the equity derivatives market, mainly in the form of total return swaps.
Credit Suisse’s exit from the PB business is the latest episode in the continued fallout from the Archegos debacle, which has raised fundamental questions surrounding excessive leverage, margin limits, risk management and transparency, and regulatory oversight within the prime brokerage sector.
The withdrawal is part of a wider rejig of Credit Suisse’s business structure, which will see it slash its investment bank division’s capital by some USD3 billion, or 25 per cent, with CHF3 billion redeployed towards its wealth management operations.
“Credit Suisse will support affected customers as they select alternative Prime Services providers of their choice,” the firm said in a statement on Monday.
“Should customers seek to benefit from the referral agreement between Credit Suisse and BNP Paribas, there will be a streamlined process in place to facilitate them obtaining Prime Services from BNP Paribas, under its terms.”
