{"text":[[{"start":12.81,"text":"In musical chairs, players whose seats are filched sometimes sit on the floor with a bump. "},{"start":17.802,"text":"This was the undignified position of Credit Suisse announcing a stiff SFr4.4bn ($4.7bn) impairment. "},{"start":25.919,"text":"The implosion of US family office client Archegos has obliterated 18 months of average net profits and cost two senior executives their jobs. "},{"start":33.874,"text":"Agile Wall Street banks, such as Goldman Sachs and Morgan Stanley, appear to have escaped unscathed. "},{"start":39.792,"text":"But the stability of systemically important banks should not rely on a talent for party games. "}],[{"start":45.57,"text":"Regulators led by the US Securities and Exchange Commission should investigate the prime broking industry. "},{"start":51.437,"text":"This is the low-profile business of helping funds such as Archegos to structure and finance bets. "}],[{"start":57.26,"text":"The risk to capital buffers is clear when six or more institutions are lending separately to a little-known investor in volatile stocks while apparently knowing little about the others. "},{"start":66.264,"text":"Without strong retained profits, Credit Suisse’s core equity tier one capital would have dropped uncomfortably below 12 per cent of risk-weighted assets. "}],[{"start":75.3,"text":"The peril to fair markets is signalled by the discussions that prime brokers reportedly held on whether to co-ordinate sales of Archegos collateral. "},{"start":82.767,"text":"Transparency is sparse in prime broking. "},{"start":85.309,"text":"Derivatives allowed Archegos to avoid disclosing hefty equity positions. "},{"start":89.514,"text":"Derivatives can fulfil the same function for hedge funds betting on controversial takeovers while generating questionable tax savings. "}],[{"start":97.42999999999999,"text":"In theory, prime brokers hedge all exposures, making only a modest margin on their activities. "},{"start":103.07199999999999,"text":"In practice, hedges are rarely perfect. "},{"start":105.702,"text":"Bonus-hungry bankers can find ways to exploit that. "}],[{"start":109.77,"text":"Members of Credit Suisse’s executive committee will themselves get no short-term bonuses for 2020 or long-term awards for 2021. "},{"start":117.47399999999999,"text":"As expected, investment bank boss Brian Chin and chief risk officer Lara Warner are out. "},{"start":122.86699999999999,"text":"The latter oversaw a series of disasters. "},{"start":125.53399999999999,"text":"They included letting Credit Suisse back defunct supply chain finance house Greensill, which is expected to cost the bank $1bn to $2bn. "}],[{"start":134.87,"text":"Thomas Gottstein has been chief executive for just over a year after decades running domestic businesses. "},{"start":140.549,"text":"He should be able to hang on — provided he tightens and centralises risk controls. "},{"start":145.154,"text":"A thinning out of underlings associated with Archegos and Greensill has already begun and must continue. "},{"start":150.572,"text":"Target CET1 should rise to a safer 13 per cent. "},{"start":153.77700000000002,"text":"Credit Suisse will need a spotless record for years to lose its share price discount. "}],[{"start":158.59,"text":"Lex recommends the FT’s Due Diligence newsletter, a curated briefing on the world of mergers and acquisitions. "},{"start":165.007,"text":"Click here to sign up. "}],[{"start":166.49,"text":""}]],"url":"https://creatives.ftacademy.cn/album/001092060-1617780099.mp3"}