Credit Suisse Reports Rise in Operational Risk on Finma Review

Credit Suisse Group AG said a review with the Swiss regulator of the model the bank uses to assess risks and capital needs related to litigation led to an increase in risk-weighted assets in the quarter.

The review led to a $6 billion add-on to operational risk-weighted assets, the Zurich-based bank said in its quarterly report today. As risk-weighted assets rise, banks must hold more capital to make sure reserves meet requirements.

The second-biggest Swiss bank has been in talks with the Swiss Financial Market Supervisory Authority over the models for operational risk since early 2012. The latest addition brings the total increase in operational risk-weighted assets to almost 17 billion francs ($18.8 billion), or 47 percent, since the end of 2011 to 53.1 billion francs.

Operational risks reflect potential losses resulting from inadequate or failed internal processes, people and systems, or from external events.

UBS AG, which was ordered by Finma to increase operational risk-weighted assets by 50 percent from October, said this week the regulator agreed to use a different way to assess risks, which resulted in an increase of 22.5 billion francs to risk-weighted assets, about 5 billion francs less than would have been the case under the previous order. Operational risk-weighted assets at Switzerland’s biggest bank amounted to 77.9 billion francs at the end of December.

Credit Suisse today reported a lower-than-estimated fourth quarter profit after booking 514 million francs in legal provisions related to U.S. tax and mortgage matters. The common equity ratio under fully-applied Basel III rules rose to 10.3 percent in the quarter from 10.2 percent on Sept. 30.

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