According to the Financial Times newspaper, Credit Suisse has adopted an unusual strategy to secure loans to UHNW individuals and oligarchs.
The Swiss lender has sought to secure its portfolio of loans against their private jets, yachts and real estate, using derivatives with a high interest rate.
The bank’s intention was to improve its capital position through risk-transfer transactions and it appears that it has had to pay more than 11 percent to persuade a small number of hedge funds to come on board. In banking terms, the amount is not huge – $80 million – but the use of the technique and its high cost to the bank have raised eyebrows in banking circles.
The division of the bank responsible for the scheme had the goal of creating ‘a positive brand impression of CS by financing the principals’ favourite business tools (business jet) and luxury toys (yachts), the FT said, having seen an investor presentation.
In January this year, António Horta-Osório, the bank’s chairman, was pushed out of his job after just eight months, ostensibly because of breaches of coronavirus quarantine rules and excessive use of the bank’s corporate jet. Although just a few months ago the man credited with turning around the fortune of the Lloyds banking group had seemed to be in a strong position, he quickly acquired the reputation of a difficult man to work with.
The latest revelations follow the scandal of the now defunct Greensill Capital, which rocked the bank last year.
FILE PHOTO: Reuters