Credit Suisse has defended a controversial financial product it devised that played a role in major global stock market losses last week.
Tidjane Thiam, chief executive of the Swiss banking giant, said the risks of its exchange traded note (ETN) linked to market volatility, which collapsed in value overnight last Monday, had been “extremely clear”.
Investors were left nursing billions of dollars of likely losses after the value of the product - which peaked at $2.2bn (£1.6bn) - was wiped out when markets turned south.
Mr Thiam told reporters today that the product’s prospectus had made it clear it was a “trading tool for sophisticated investors to managed daily trading risks”. He said Credit Suisse - which is closing the product - had manufactured it, but had not sold it.
“It’s a trading tool - we’ve told people, do not invest in this, it has zero value. If you keep it more than one day you may lose everything."
He added: “The reason we have an accelerated closure process is because it can actually lose all of its value. And it says if it loses more than 80pc of its value in one day we probably will close it. The reason is once it’s lost 80pc of its value it can’t recover.
“There’s a process for that - we don’t take those decisions lightly.” He said the product had not had a material impact on the firm’s finances.
In its results for 2017, Credit Suisse posted a reduced loss of 983m Swiss francs (£755m). A previously flagged 2.3bn franc hit from US tax reforms prevented a return to profit after three years of cost-cutting.
The loss was lower than analysts expected and an improvement on the bank's losses of 2.7bn francs in 2016 and 2.9bn francs in 2015. Shares in Credit Suisse rose more than 3pc in Zurich.
Mr Thiam said recent volatility had boosted the bank’s markets business at the start of this year, suggesting a return to choppier conditions could benefit investment banks after a period of calm.
Credit Suisse has come under pressure from an activist investor, Swiss hedge fund RBR, which took a stake in the bank last year and is pressing for the firm to hive off its investment bank and move it to New York from Zurich.
“The results confirm that there is need for additional action. Now it is up to Credit Suisse to show alternatives,” RBR said in a statement.
Mr Thiam insisted: “Our strategy is working. We generated profitable growth in 2017.”