Credit Suisse Must Have Forgot 'The Great Winfield’
The real takeaway from the Archegos implosion is the widespread “de-skilling” that has taken place in the banking industry.
Swiss bank Credit Suisse may have a culture problem.
Photographer: Fabrice Coffrini/AFP via Getty Images
The business model of banking is under assault, from ultra-loose central bank monetary policies that pinch profits to inroads made by new wave financial technology companies taking market share. Of all the challenges, staffing issues could prove to be the most problematic, as laid bare by Credit Suisse Group AG’s board report into how the bank lost about $5.5 billion from the implosion of Archegos Capital Management.
The report concluded that Credit Suisse failed to properly monitor its exposure to the hedge fund, but the real takeaway is the widespread “de-skilling” that has taken place in the banking industry, with experienced managers replaced by younger and cheaper hires. This “juniorization” of the business should be shareholders’ most immediate worry. With risk taking at all-time highs and the end of a long bull market beckoning in most financial assets, shareholders are likely to find they will be paying for a very expensive education as the new generation of bankers confront the realities of a bear market.