Credit Suisse Sets Out Planned Changes In Legal Structure To Meet Regulatory Demands

Tom Burroughes

21 November 2013

today set out a programme to develop its legal structure to be in shape to deal with existing and future regulatory requirements as the country’s banking regime continues to digest the impact of the 2008 financial crisis, which saw several of the world’s major banks bailed out by taxpayers.

The programme, which is subject to final approval by regulators, is planned to be put into force from the middle of 2015, the Zurich-listed bank said in a statement. (Earlier this week, meanwhile, Credit Suisse's private banking heads set out their strategy for this part of the bank, as seen here.)

“Since 2012, Credit Suisse has been developing a program to evolve the group’s legal entity structure to meet developing and future regulatory requirements. This has been prepared in discussion with FINMA and will address regulations in Switzerland (Banking Ordinance), the United States (the Federal Reserve’s Enhanced Prudential Standards for Foreign Banking Organizations) and the United Kingdom (Recovery and Resolution Planning),” the bank said.

The legal structure currently consists of a global branch network, primarily used for Credit Suisse’s private banking business, and three main subsidiaries, primarily used for its investment banking business.

“In the future, Credit Suisse will more closely align the booking of its investment banking business to the region in which it originates from a client and risk management perspective,” it said.

“These changes are designed to both meet future requirements for global recovery and resolution planning and result in a substantially less complex and more efficient operating infrastructure for the bank. Furthermore, Swiss banking law provides for the possibility of a limited reduction in capital requirements in the event of an improvement in resolvability which this program intends to deliver,” it said.

The main changes:

In Switzerland, Credit Suisse plans to create a subsidiary for its Swiss-booked business (primarily wealth management, retail and corporate and institutional clients as well as the product and sales hub in Switzerland);

Credit Suisse’s UK operations will remain the hub of its European investment banking business while Credit Suisse is planning that its two principal UK operating subsidiaries (Credit Suisse Securities (Europe) Ltd and Credit Suisse International) will be consolidated into one single subsidiary. The programme will look to align non-European business to the appropriate entities in the Americas, primarily Credit Suisse Securities (USA), and in Asia Pacific, through the Singapore Branch of Credit Suisse.

In the US, Credit Suisse's existing broker-dealer subsidiary, Credit Suisse Securities (USA) is planned to remain a subsidiary of Credit Suisse USA, a US holding company. Credit Suisse USA, which will hold its US-based operating businesses, will be subject to the Federal Reserve’s final rules for Enhanced Supervision of Foreign Banking Organizations in the US;

The firm intends to create a separately capitalized global infrastructure legal entity in Switzerland and a US subsidiary of Credit Suisse USA Inc. In principle, these will include all Shared Services functions;

Once the final legal framework is agreed, Credit Suisse plans to issue bail-in eligible debt out of the group holding company, Credit Suisse Group AG, to enable a single point of entry bail-in resolution strategy.