According to Deutsche Bank analysts, changes in how banks gauge the risk of losses on their assets may lead Credit Suisse Group AG’s incoming Chief Executive Officer Tidjane Thiam to further shrink its investment bank.
He can shut down the government debt and foreign exchange business and put its securitization business up for sale to a U.S. competitor, Bloomberg reported referring to Matt Spick and Omar Keenan who had said in a note to investors.
They also consider that Thiam may scale back the Swiss bank’s fixed-income business in emerging markets.
Regulators are checking banks’ ability to reduce their capital requirements by simply changing how they measure their risk-weighted assets.
The international Basel committee on banking supervision in December published draft plans to set a capital floor and strengthen standardized methods, part of a broader regulatory reform in response to the financial crisis.
The review will lead to an increase in risk-weighted assets at UBS Group AG and Credit Suisse and will likely put pressure on their capital ratios, a measure of financial strength, according to the Deutsche Bank analysts.
Since 2010, Credit Suisse has been cutting its investment bank, reducing assets weighted by risk at the businesses the bank wants to keep by half. It aims to split risk-weighted assets at least equally between its money-managing businesses and the investment bank, the bank’s Chairman Urs Rohner said in March.
Credit Suisse appointed Thiam to succeed Brady Dougan in March. The bank’s shares have risen 16 percent since Thiam’s appointment, partly on speculation he’ll make deep cuts to fixed-income trading.
