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Credit Suisse feeling the heat

The walking disaster area that is Credit Suisse is intending to recompense more investors burnt by the Swiss bank’s exposure to belly-up Greensill Capital.

News agency Reuters reports that the bank closed around US$10bn of funds that had bought notes from Greensill Capital, the supply chain financing outfit.

Some US$3.1bn of this has been repaid to customers while US$1.5bn in cash was in the funds as of March 29.

“Over time, we expect the majority part of the funds’ investments to be recovered in the liquidation process, and we have recourse to other measures should they be necessary, including possible legal action,” Credit Suisse said.

Legal action seems to be the order of the day at the Swiss bank, which yesterday kicked off a legal battle that could see Liberty Steel and its ultimate owner, the GFG Alliance, tip into insolvency.

Reports indicate Credit Suisse has instructed the administrators to file wind-up orders against Liberty Commodities, a metal trading unit owned by Sanjeev Gupta, the man behind Liberty Steel and the GFG Alliance.

The GFG Alliance’s main lender was Greensill Capital, so when the finance firm was declared insolvent last month it found itself in a financial pickle.

Meanwhile, Credit Suisse is also licking its wounds over its exposure to troubled hedge fund Archegos Capital, which last week defaulted on a margin call on its punt on the shares of ViacomGBS; buying “on margin” is a way of leveraging investment funds so that any gains can be amplified but when the price moves the wrong way, the investor is called to stump up more money to cover its bet.

The accident-prone bank has certainly done a lot of damage to the reputation of Swiss bankers in the last few weeks, but at least Swiss chocolate is halfway decent although Swiss cheese is in danger of becoming a metaphor for Credit Suisse’s balance sheet.

The perception is growing that the Swiss bank wants to play with the big boys in the investment banking market but does not have the street smarts to cope with playground bullies such as Goldman Sachs and JP Morgan.

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