UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 6-K
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REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
October 3, 2013
Commission File Number 001-15244
CREDIT SUISSE GROUP AG
(Translation of registrant’s name into English)
Paradeplatz 8, 8001 Zurich, Switzerland
(Address of principal executive office)
______________
Commission File Number 001-33434
CREDIT SUISSE AG
(Translation of registrant’s name into English)
Paradeplatz 8, 8001 Zurich, Switzerland
(Address of principal executive office)
______________
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
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Form 20-F
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Form 40-F
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
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Yes
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No
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If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-.
This report, which constitutes the public section of the US resolution plan prepared as part of the Recovery and Resolution Plan for Credit Suisse Group AG and filed with certain of its regulators, is being filed by Credit Suisse Group AG and Credit Suisse AG and is hereby incorporated by reference into the Registration Statement on Form F-3 (file no. 333-180300) and the Registration Statement on Form S-8 (file no. 333-101259).
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Credit Suisse Global RRP September 2013
Chapter 1 – Public section
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Credit Suisse Global Recovery and Resolution Plan
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Chapter 1 – Public section
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Credit Suisse Global RRP September 2013
Chapter 1 – Public section
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1
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Public section
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3
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1.1
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Summary of resolution plan
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3
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1.1.1
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The names of Material Legal Entities
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5
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1.1.2
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Description of Core Business Lines
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5
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1.1.3
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Summary financial information
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8
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1.1.4
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Description of derivative and hedging activities
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10
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1.1.5
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Memberships in material payment, clearing and settlement systems
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11
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1.1.6
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Description of non-US operations
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11
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1.1.7
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Material supervisory authorities
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12
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1.1.8
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Principal officers
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12
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1.1.9
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Resolution planning corporate governance structure and processes related to resolution planning
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13
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1.1.10
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Description of material management information systems
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13
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1.1.11
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High-level description of resolution strategy
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14
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Credit Suisse Global RRP September 2013
Chapter 1 – Public section
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1
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Public section
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The Recovery and Resolution Plan (RRP) for Credit Suisse Group AG1 (Group) addresses the requirements for the public section of the US resolution plan as described in the rules implementing section 165(d) of the Dodd-Frank Act, dated November 1, 2011, jointly issued by the Board of Governors of the Federal Reserve System (FRB) and the Federal Deposit Insurance Corporation (FDIC) in the United States (US). Our RRP also addresses the Guidance for 2013 Section 165(d) Annual Resolution Plan Submissions by Foreign-Based Covered Companies That Submitted Initial Resolution Plans in 2012, dated April 15, 2013 and jointly issued by the FRB and FDIC. In addition to the requirements of the FRB and FDIC in the US, our RRP also addresses the RRP guidance issued in Switzerland and in the United Kingdom (UK). The Swiss Financial Market Supervisory Authority (FINMA) issued RRP guidance as contained in FINMA’s Recovery and Resolution Guidance Plan, dated March 26, 2012. Before its abolition on April 1, 2013 and replacement by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), the Financial Services Authority (FSA) in the UK issued RRP guidance with assistance from the Bank of England and the HM Treasury as contained in the FSA’s Recovery and Resolution Plans Consultation Paper 11 / 16, dated August 9, 2011 and the FSA’s ‘RRP Guidance pack for firms’ published alongside the FSA RRP Consultation Paper and subsequent papers (including the FSA’s Recovery and Resolution Plans Feedback Statement FS 12 / 1 dated May 2012, which was accompanied by an updated RRP Information Pack, and the FSA’s Statement on Recovery and Resolution Planning dated February 20, 2013). Going forward, our RRP will also address the RRP guidance and requirements of other countries as they are issued by the respective regulatory bodies.
In order to comply with the rules governing the creation of our RRP, we have had to gather and present information regarding our operations in a way that is different from how we do so for other purposes. These differences are a result of the particular requirements governing the preparation and contents of our RRP and do not reflect any changes to our business strategy.
All financial and other data is presented as of December 31, 2012, unless otherwise noted.
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1.1
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Summary of resolution plan
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Credit Suisse Group operates as an integrated global bank, combining our strengths and expertise in two global divisions, Private Banking & Wealth Management and Investment Banking. Our divisions are supported by our Shared Services (ShS) functions, which provide corporate services and business solutions while ensuring a strong compliance culture.
Private Banking & Wealth Management
In November 2012, we integrated our former Private Banking (PB) and Asset Management (AM) divisions into a single, new Private Banking & Wealth Management (PB&WM) division, including the majority of our securities trading and sales business in Switzerland, which was transferred from the Investment Banking division.
Our PB&WM division is comprised of our Wealth Management Clients (WMC), Corporate & Institutional Clients (C&IC) and AM businesses. In Wealth Management (WMC), we serve more than two million clients, including ultra-high net worth and high net worth individuals around the globe and private clients in Switzerland, making us one of the largest global players. Our network comprises 3,910 relationship managers in 42 countries with more than 330 offices and 22 booking centers. Our C&IC business serves the needs of over 100,000 corporations and institutions, mainly in Switzerland, and is an important provider of financial products and services. Asset Management offers investment solutions and services globally to a wide range of clients, including pension funds, governments, foundations and endowments, corporations and individuals.
Investment Banking
Investment Banking (IB) provides a broad range of financial products and services, with a focus on businesses that are client-driven, flow-based and capital-efficient. Our products and services include global securities sales, trading and execution, prime brokerage, capital raising and advisory services, as well as comprehensive investment research. Our clients include corporations, governments, pension funds and institutions around the world. We deliver our global investment banking capabilities via regional and local teams based in all major developed and emerging market centers. Our integrated business model enables us to gain a deeper understanding of our clients and deliver creative, high-value, customized solutions based on expertise from across Credit Suisse.
1 For the purposes of this document, unless the context otherwise requires, the terms Credit Suisse Group, CSG, Credit Suisse, CS, the Group, we, us, and our mean Credit Suisse Group AG and its consolidated subsidiaries. Credit Suisse AG is the Swiss bank subsidiary of the Group. The term ‘the Bank’ means only Credit Suisse AG and its consolidated subsidiaries. Refer to the footnote on page 4 of the Group 2012 Annual Report.
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Chapter 1 – Public section
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Shared Services
Shared Services provides centralized corporate services and business support for PB&WM and IB, with services which include the following areas: CFO, General Counsel, Chief Risk Officer, Talent, Branding and Communications, One Bank Collaboration and Public Policy. Shared Services acts as an independent control function.
Global structure
Our global structure comprises four regions: Switzerland; Europe, Middle East and Africa (EMEA); Americas; and Asia Pacific (APAC).
Switzerland
In our home market, we are a leading bank for private, corporate and institutional clients. We employ 19,400 people in Switzerland. Around 2,000 relationship managers at more than 200 branches offer clients a full range of private banking services. IB provides a broad range of financial services to its Swiss client base, while AM offers traditional and alternative investment products and multi-asset class solutions.
Europe, Middle East and Africa (EMEA)
Credit Suisse is active in 30 countries across the EMEA region with 9,300 employees working in 75 offices. Our regional headquarters are in the United Kingdom (UK). The region encompasses both developed markets such as France, Germany, Italy, Spain and the UK, as well as fast growing markets including Russia, Poland, Turkey and the Middle East.
Americas
The Americas region comprises our operations in the US, Canada, the Caribbean and Latin America. With 11,300 employees working in 42 cities spanning 14 countries, we offer clients local market expertise and access to our full range of global resources across our two divisions and as an integrated bank.
Asia Pacific (APAC)
Credit Suisse is present in 12 Asia Pacific markets with 7,400 employees. CS has invested substantially in its presence in key major markets, including Australia, China, Hong Kong, Korea, Japan and India, broadened the scope of its offerings and continued to grow selected emerging markets franchises. PB&WM has its principal centers in Singapore and Hong Kong, leveraging the IB activities to deliver integrated solutions and quality investment performance to clients.
For further information on our business refer to the ‘Our businesses’ and ‘Organizational and regional structure’ sections under the ‘Information on the Company’ part of the Group Annual Report 2012.
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Credit Suisse Global RRP September 2013
Chapter 1 – Public section
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1.1.1
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The names of Material Legal Entities
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For purposes of the RRP rules, Credit Suisse has identified 23 entities that satisfy the Material Legal Entity (MLE) requirements and guidance issued by FINMA, the FRB / FDIC and the FSA. In general, the applicable regulations define a MLE as an entity that is significant to a Core Business Line (CBL) (refer to chapter 1.1.2 below for a definition of CBLs) or a Critical Operation (CO) (defined as an operation whose discontinuance or disorderly wind-down would have a material impact on or pose a threat to the financial stability of Switzerland, the US or the UK). The table below lists our MLEs by region.
Fig. 1-1: Credit Suisse MLEs by region
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MLEs
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Region
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General entity description
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Credit Suisse Group AG
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Switzerland
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Swiss holding company
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Credit Suisse AG
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Switzerland
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Swiss bank
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Credit Suisse Securities (USA) LLC
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US / Americas
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US broker dealer
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Credit Suisse Capital LLC
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US / Americas
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US OTC derivatives broker dealer
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Credit Suisse Management LLC
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US / Americas
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US investment banking entity
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Credit Suisse (USA), Inc.
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US / Americas
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US holding company
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Credit Suisse AG, New York Branch
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US / Americas
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New York branch of Credit Suisse AG
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Credit Suisse Invesco LLC
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US / Americas
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Service Entity
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RD Purchasing LLC
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US / Americas
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Service Entity
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Credit Suisse AG, Cayman Branch
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Americas
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Cayman Islands branch of Credit Suisse AG
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Credit Suisse AG, Nassau Branch
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Americas
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Bahamas branch of Credit Suisse AG
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Credit Suisse Securities (Europe) Limited
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UK / EMEA
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UK securities dealer
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Credit Suisse International
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UK / EMEA
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UK bank
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Credit Suisse (UK) Limited
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UK / EMEA
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UK private bank
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Credit Suisse AG, London Branch
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UK / EMEA
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UK branch of Credit Suisse AG
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Credit Suisse AG, Guernsey Branch
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EMEA
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Guernsey branch of Credit Suisse AG
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Credit Suisse AG, Singapore Branch
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APAC
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Singapore branch of Credit Suisse AG
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Credit Suisse (Hong Kong) Limited
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APAC
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Hong Kong broker dealer
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Credit Suisse Securities (Japan) Limited
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APAC
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Japan broker dealer
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Banco de Investimentos CS (Brasil) S.A.
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Americas
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Brazilian investment banking entity
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Credit Suisse (Poland) Sp. Zo.o, Wroclaw
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EMEA
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Service Entity
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Credit Suisse Service India Private Limited
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APAC
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Service Entity
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Credit Suisse Business Analytics (India) Private Limited, Mumbai
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APAC
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Service Entity
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1.1.2
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Description of Core Business Lines
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For purposes of the RRP rules, Credit Suisse has identified 12 global CBLs pursuant to the requirements and guidance issued by FINMA and the FRB / FDIC. This identification was conducted in accordance with the applicable regulatory guidance and is not intended to be a strategic view of Credit Suisse. In general, under the applicable regulations, a CBL is an operation whose failure, in the Group's view, would result in a material loss of revenue, profit, or franchise value. The CBLs we have identified for purposes of resolution planning do not necessarily correspond to the segments and business lines we use for financial reporting or the way in which our management analyzes our business. In particular, the operations of our Asset Management business, while not representing a CBL pursuant to the applicable regulatory definitions, are nonetheless central to our integrated business model and organization, and are important to the success of our One Bank strategy. Similarly, a number of business lines in our Investment Banking division, including equity and debt underwriting, advisory services, and the foreign exchange and commodities business lines of our fixed income sales and trading business, remain vital to our business model and organization without meeting the applicable regulatory definitions. The table below lists each of our Core Business Lines and the division to which they belong.
Fig. 1-2: Global CBLs
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Division
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CBLs
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Investment Banking
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Fixed Income
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Rate Products
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Securitized Products
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Credit Products
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Emerging Markets Group (EMG)
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Equities
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Equity Derivatives
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Cash Equities
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Prime Services
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Investment Banking Department
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Corporate Bank
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Private Banking &
Wealth Management
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Corporate & Institutional Clients
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Premium Clients Switzerland & Global EAM
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Private Banking & Wealth Management Clients Switzerland
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Private Banking APAC
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Credit Suisse Global RRP September 2013
Chapter 1 – Public section
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The following chapters provide a high-level description of each CBL.
Rate Products
Our Rate Products team is a global market maker in cash and derivatives markets and a primary dealer in multiple jurisdictions including US, Europe and Japan. This covers the full spectrum of government and agency bonds and swap and flow option products and enables us to service issuers, risk managers and investors in all aspects of their activities. We offer our clients an extensive suite of investor and liability management products that incorporate innovative leading ideas that price, manage risk and structure interest rate, foreign exchange and hybrid solutions in over-the-counter (OTC), note and other forms. We give our clients access to a global liquidity and firm financing capability that utilizes repurchase agreements and related instruments to help clients with balance sheet management and optimization of funding.
Securitized Products
Our Securitized Products team delivers a full spectrum of private label trading, government guaranteed trading, transaction management, structured client solutions and asset financing. Securitized Products trades, securitizes, syndicates, underwrites and provides research for various forms of securities, primarily residential mortgage-backed securities and asset-backed securities. Both the mortgage- and asset-backed securities are based on underlying pools of assets, and include both government and agency-backed, as well as private label loans. We also have a presence in mortgage servicing through our wholly owned subsidiary, Select Portfolio Servicing (SPS).
Credit Products
Our Global Credit Products team is a market maker in public debt across the credit spectrum, including investment grade, high yield and distressed debt, and is a market maker in the credit derivatives market, including single-name credit default swaps (CDS), CDS indices and levered equity strategies. We are a market maker in par loans, loan CDS and loan CDS indices as well as distressed (non-performing) loans. Our capital markets businesses are responsible for structuring, underwriting and syndicating the full range of products for our issuer clients including: investment grade and leveraged loans, investment grade and high yield bonds and unit transactions. We are also a provider of committed financing, including bridge and mezzanine finance. Our structured credit solutions include asset swaps, negative basis trades, skew arbitrage, structured funding, regulatory capital solutions, restructuring and recovery solutions.
Emerging Markets Group (EMG)
Our Fixed Income Emerging Markets team has a global presence with dedicated regional and country teams. We bring clients the entire spectrum of emerging market products across the key emerging markets of the world, in cash and derivatives across foreign exchange, credit, interest rates and hybrid asset classes. We deliver access to the capital markets, as well as specialized financing, trading and risk management expertise.
Equity Derivatives
Our Equity Derivatives team specializes in providing customers with a full range of equity-related products, investment options, and financing solutions, as well as sophisticated hedging and risk management expertise and comprehensive execution capabilities to financial institutions, hedge funds, asset managers and corporations. Products include convertible bonds, warrants, OTC derivatives, listed derivatives and program trading. Equity Derivatives also includes the Fund Linked Product Group which is involved in the structuring, risk management and distribution of structured mutual fund and alternative investment products.
Cash Equities
Our Cash Equities team executes client orders and makes markets in listed and OTC cash securities, as well as convertible and derivative securities. We provide liquidity to the market through both capital commitments and risk management, and we represent institutional accounts in the equity marketplace by serving as the communication conduit between clients and equity traders. We also provide clients with research, trading ideas and capital commitments and identify trends in the marketplace in order to obtain the best and most effective execution.
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Credit Suisse Global RRP September 2013
Chapter 1 – Public section
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Prime Services
Our Prime Services team provides a wide range of services to hedge funds and institutional clients, including prime brokerage, start-up services, capital introductions, securities lending, synthetics and innovative financing solutions. Prime Services provides a globally integrated, multi-asset platform across traditional prime brokerage, delta one, listed derivatives and managed lending.
Corporate Bank
The Corporate Bank Group comprises several distinct areas including corporate lending, portfolio management, portfolio management analysis and the transaction management group. Collectively these groups are responsible for negotiating new loans and amendments, and for managing loan risk exposure and capital limits associated with the Investment Banking department loan portfolio. Business activities consist of loan origination for Credit Suisse-led loan transactions and non-Credit Suisse-led loan participations. The Corporate Bank Group originates loans in support of Investment Banking clients globally, with resources located in New York, London and Zurich.
Corporate & Institutional Clients
Our Corporate & Institutional Clients business is an important provider of financial products and services, serving the needs of over 100,000 corporations and institutions, mainly in Switzerland. We provide premium advice and solutions across a broad range of banking services, including lending, cash and liquidity management, trade finance, corporate finance, foreign exchange, investment solutions, ship and aviation finance, global custody and asset and liability management. Clients include small and medium-sized enterprises, global corporations and commodity traders, banks, insurance companies and Swiss pension funds.
Premium Clients Switzerland & Global External Asset Managers
Premium Clients Switzerland & Global EAM serves clients with a wealth of more than CHF 25 million and provides a range of wealth management advisory services and solutions to ultra-high net worth and high net worth individuals predominantly based in Switzerland and provides a dedicated offering and expertise for external asset managers. We deliver innovative and integrated solutions in close collaboration with Investment Banking and Private Banking & Wealth Management Products and offer our clients a distinct value proposition, combining a global reach with a structured advisory process and access to a broad range of sophisticated products and services.
Private Banking & Wealth Management Clients Switzerland
Private Banking & Wealth Management Clients Switzerland serves clients with wealth of less than CHF 25 million and provides a range of banking services to high net worth individual, affluent and retail clients, predominantly in Switzerland, including current accounts, savings accounts, loans and credit cards. We analyze a client’s personal financial situation and prepare investment strategies based on an individual risk profile of liquid and illiquid assets and present and future liabilities. We offer a range of wealth management solutions tailored to specific client segments and offer a comprehensive range of investment advice and discretionary asset management services based on the analysis and recommendations of our global research team.
Private Banking & Wealth Management APAC
Private Banking & Wealth Management APAC is committed to serve predominantly high net worth and ultra-high net worth individuals with a wealth of more than USD 2 million who are based in the APAC region. We deliver innovative and integrated solutions in close collaboration with Investment Banking and offer clients a distinct value proposition, combining a global reach with a structured advisory process and access to a broad range of sophisticated products and services.
For further information on our Investment Banking and Private Banking & Wealth Management businesses refer to the ‘Our businesses’ section of the Group Annual Report 2012.
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Credit Suisse Global RRP September 2013
Chapter 1 – Public section
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1.1.3
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Summary financial information
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The consolidated balance sheet for Credit Suisse Group AG as of December 31, 2012 is presented below.
Fig. 1-3: Consolidated balance sheet for Credit Suisse Group AG as of December 31, 2012 (in CHF million)
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Total assets
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924,280
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Cash and due from banks
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61,763
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Interest-bearing deposits with banks
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1,945
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Central bank funds sold, securities purchased under resale agreements and securities borrowing transactions
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183,455
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Securities received as collateral, at fair value
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30,045
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Trading assets, at fair value
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256,399
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Investment securities
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3,498
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Other investments
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12,022
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Net loans
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242,223
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Premises and equipment
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5,618
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Goodwill
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8,389
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Other intangible assets
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243
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Brokerage receivables
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45,768
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Other assets
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72,912
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Total liabilities and equity
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924,280
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Total liabilities
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881,996
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Due to banks
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31,014
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Customer deposits
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308,312
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Central bank funds purchased, securities sold under repurchase agreements and securities lending transactions
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132,721
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Obligation to return securities received as collateral, at fair value
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30,045
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Trading liabilities, at fair value
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90,816
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Short-term borrowings
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18,641
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Long-term debt
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148,134
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Brokerage payables
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64,676
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Other liabilities
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57,637
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Total equity
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42,284
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Total shareholders' equity
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35,498
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Non-controlling interests
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6,786
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For further information on our financial statements refer to the ‘Consolidated financial statements’ section of the Group Annual Report 2012.
Funding sources and uses
We primarily fund our balance sheet through core customer deposits, long-term debt and shareholders’ equity. A substantial portion of our balance sheet is match funded and requires no unsecured funding. Match funded balance sheet items consist of assets and liabilities with close to equal liquidity durations and values so that the liquidity and funding generated or required by the positions are substantially equivalent. Cash and due from banks and reverse repurchase agreements are highly liquid. A significant part of our assets, principally unencumbered trading assets that support the securities business, is comprised of securities inventories and collateralized receivables that fluctuate and are generally liquid. These liquid assets are available to settle short-term liabilities. These assets include our liquidity pool which as of the end of 2012, based on our internet model, was CHF 127 billion, net of a stress test level haircut. Loans, which comprise the largest component of our illiquid assets, are funded by our core customer deposits, with an excess coverage of 20% as of the end of 2012, down from 22% as of the end of 2011, reflecting a higher increase in loans than the increase in core customer deposits. We fund other illiquid assets, including real estate, private equity and other long-term investments and a haircut for the illiquid portion of securities, with long-term debt and equity, where we try to maintain a substantial funding buffer.
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Credit Suisse Global RRP September 2013
Chapter 1 – Public section
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Fig. 1-4: Balance sheet funding structure as of December 31, 2012 (in CHF billion)
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Credit Suisse Global RRP September 2013
Chapter 1 – Public section
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Our core customer deposits totaled CHF 285 billion as of the end of 2012, an increase of 3% compared to CHF 278 billion as of the end of 2011, as a result of a growth in the customer deposit base in Private Banking & Wealth Management. Core customer deposits are from clients with whom we have a broad and longstanding relationship. Core customer deposits exclude deposits from banks and certificates of deposit. We place a priority on maintaining and growing customer deposits, as they have proved to be a stable and resilient source of funding even in difficult market conditions.
While we do maintain a branch of Credit Suisse AG in New York, it does not accept retail deposits and the deposits the Branch does hold are not insured by the FDIC. Further, we do not own a bank subsidiary in the United States, and are therefore not subject to the RRP requirements applicable to certain insured depository institutions.
Treasury is responsible for the development, execution and regular updating of our funding plan. The plan reflects projected business growth, development of the balance sheet, future funding needs and maturity profiles as well as the effects of changing market conditions.
Interest expense on long-term debt, excluding structured notes, is monitored and managed relative to certain indices, such as the London Interbank Offered Rate, that are relevant to the financial services industry. This approach to term funding best reflects the sensitivity of both our liabilities and our assets to changes in interest rates. Our average funding cost, which is allocated to the divisions, remained largely unchanged at December 31, 2012 as compared to the end of 2011.
We continually manage the impact of funding spreads through careful management of our liability maturity mix and opportunistic issuance of debt. The effect of funding spreads on interest expense depends on many factors, including the absolute level of the indices on which our funding is based.
We diversify our funding sources by issuing structured notes, which are debt securities on which the return is linked to commodities, stocks, indices or currencies or other assets. We generally hedge structured notes with positions in the underlying assets or derivatives. Our liquidity planning includes settlement of structured notes. We had CHF 36.6 billion of structured notes outstanding as of the end of 2012 compared to CHF 35.7 billion as of the end of 2011.
We also use collateralized financings, including repurchase agreements and securities lending agreements. The level of our repurchase agreements fluctuates, reflecting market opportunities, client needs for highly liquid collateral, such as US treasuries and agency securities, and the impact of balance sheet and risk-weighted asset limits. In addition, matched book trades, under which securities are purchased under agreements to resell and are simultaneously sold under agreements to repurchase with comparable maturities, earn spreads, are relatively risk-free and are generally related to client activity.
Our primary source of liquidity is funding through consolidated entities. The funding through non-consolidated special purpose entities and asset securitization activity is immaterial.
Securities for funding and capital purposes are issued primarily by the Bank, our principal operating subsidiary and a US registrant. The Bank lends funds to its operating subsidiaries and affiliates on both a senior and subordinated basis, as needed; the latter typically to meet capital requirements, or as desired by management to support business initiatives.
For further information on our funding sources and uses refer to the ‘Treasury, Risk, Balance sheet and Off-balance sheet’ section of the Group Annual Report 2012.
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1.1.4
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Description of derivative and hedging activities
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We enter into derivative contracts in the normal course of business for market making, positioning and arbitrage purposes, as well as for our own risk management needs, including mitigation of interest rate, foreign exchange and credit risk. These derivatives are generally either privately negotiated OTC contracts or standard contracts transacted through regulated exchanges. The Group’s most frequently used freestanding derivative products, entered into for trading and risk management purposes, include interest rate, credit default and cross-currency swaps, interest rate and foreign exchange options, foreign exchange forward contracts and foreign exchange and interest rate futures.
The Group also enters into contracts that are not considered derivatives in their entirety but include embedded derivative features. Such transactions primarily include issued and purchased structured debt instruments where the return may be calculated by reference to an equity security, index or third party credit risk, or that have non-standard interest or foreign exchange terms.
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On the date a derivative contract is entered into, the Group designates it as belonging to one of the following categories:
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n
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Trading activities
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n
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A risk management transaction that does not qualify as a hedge under accounting standards (referred to as an economic hedge)
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n
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A hedge of the fair value of a recognized asset or liability
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n
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A hedge of the variability of cash flows to be received or paid relating to a recognized asset or liability or a forecasted transaction
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n
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A hedge of a net investment in a foreign operation
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The Group is active in most of the principal trading markets and transacts in many popular trading and hedging products. As noted above, this includes the use of swaps, futures, options and structured products, such as custom transactions using combinations of derivatives, in connection with its sales and trading activities. Trading activities include market making, positioning and arbitrage activities. The majority of the Group’s derivatives are used for trading activities.
Economic hedges arise when the Group enters into derivative contracts for its own risk management purposes, but the contracts entered into do not qualify for hedge accounting under US GAAP. These economic hedges include the following types:
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n
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Interest rate derivatives to manage net interest rate risk on certain core banking business assets and liabilities
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n
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Foreign exchange derivatives to manage foreign exchange risk on certain core banking business revenue and expense items, as well as on core banking business assets and liabilities
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n
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Credit derivatives to manage credit risk on certain loan portfolios and
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n
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Futures to manage risk on equity positions including convertible bonds
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Derivatives used in economic hedges are included as trading assets or trading liabilities in the consolidated balance sheets.
We regularly hedge our portfolio to manage our overall risk position, adhere to our risk appetite, minimize losses, facilitate our client franchise, and provide liquidity to the market.
For further information on our derivatives and hedging activities, refer to the ‘Treasury, Risk, Balance sheet and Off-balance sheet’ and Note 30 of ‘Consolidated financial statements’ sections of the Group Annual Report 2012.
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1.1.5
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Memberships in material payment, clearing and settlement systems
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In order to facilitate our business, we have memberships in major global payment, clearing and settlement systems. The figure below includes a list of our memberships in these systems.
Fig. 1-5: Memberships in material payment, clearing and settlement systems
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System name
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Depository Trust Company (DTC) Online
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Depository Trust and Clearing Corporation (DTCC)
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SIX Interbank Clearing (SIC, euroSIC)
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Euroclear
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ICE Clear
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Fixed Income Clearing Corporation (FICC)
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London Clearing House (LCH) Clearnet Ltd
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SWIFT
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Fedwire
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CLS Group
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CME Group
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1.1.6
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Description of non-US operations
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The US regulations require that Credit Suisse provide a description of our non-US operations. Refer to the business overview in chapter 1.1 for a description of Credit Suisse’s global operations and regional structure. Further information on our business is included in the ‘Our businesses’ and ‘Organizational and regional structure’ sections under the ‘Information on the Company’ part of the Group Annual Report 2012.
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1.1.7
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Material supervisory authorities
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Our operations are regulated by authorities in each of the jurisdictions in which we have offices, branches and subsidiaries. Central banks and other bank regulators, financial services regulators, securities regulators and exchanges and self-regulatory organizations are among the regulatory authorities that oversee our Private Banking & Wealth Management and Investment Banking divisions. The figure below includes our material supervisory authorities related to the MLEs and CBLs identified in the RRP.
Fig. 1-6: Material supervisory authorities of Credit Suisse
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Supervisory authority
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Jurisdiction
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|
Swiss Financial Market Supervisory Authority (FINMA)
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Switzerland
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|
Board of Governors of the Federal Reserve System
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United States
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Federal Reserve Bank of New York
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United States
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US Securities and Exchange Commission (SEC)
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United States
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|
New York State Department of Financial Services
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New York State, United States
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|
New York Stock Exchange (NYSE)
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United States
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|
Financial Industry Regulatory Authority (FINRA)
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United States
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National Futures Association
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United States
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US Commodity Futures Trading Commission (CFTC)
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United States
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|
UK Prudential Regulation Authority (PRA)
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United Kingdom
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UK Financial Conduct Authority (FCA)
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United Kingdom
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|
Cayman Islands Monetary Authority
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Cayman Islands
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|
Central Bank of the Bahamas
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Bahamas
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|
Securities Commission of the Bahamas
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Bahamas
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Banco Central do Brasil
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Brazil
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|
Guernsey Financial Services Commission
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Guernsey
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|
Monetary Authority of Singapore (MAS)
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Singapore
|
|
Japan Financial Services Agency
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Japan
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|
Hong Kong Securities and Futures Commission
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Hong Kong, China
|
|
Ministry of Corporate Affairs, Ministry of Communications and Information Technology, Development Commissioner of Special Economic Zone, Government of India
|
India
|
For further information on our regulators and supervisors refer to the ‘Regulation and supervision’ section of the Group Annual Report 2012.
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1.1.8
|
Principal officers
|
The figure below includes the members of the Executive Board for Credit Suisse as of September 30, 2013. The Executive Board is responsible for the day-to-day operational management of Credit Suisse. It develops and implements the strategic business plans for the Group overall as well as for the principal businesses, subject to approval by the Board of Directors of Credit Suisse Group. It further reviews and coordinates significant initiatives, projects and business developments in the divisions, regions and in the ShS functions and establishes Group-wide policies. The composition of the Executive Board of the Group and the Bank is identical.
Fig. 1-7: Credit Suisse Group AG Executive Board members as of September 30, 2013
|
Member
|
Role
|
|
Brady W. Dougan
|
Group Chief Executive Officer
|
|
Gaël de Boissard, Joint Head of Investment Banking and Regional CEO of EMEA
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Divisional & Regional Head
|
|
Romeo Cerutti, General Counsel
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ShS Head
|
|
Tobias Guldimann, Chief Risk Officer1
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ShS Head
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|
David R. Mathers, CFO and Head of IT and Operations
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ShS Head
|
|
Hans-Ulrich Meister, Joint Head of Private Banking & Wealth Management and Regional CEO of Switzerland
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Divisional & Regional Head
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|
Robert S. Shafir, Joint Head of Private Banking & Wealth Management and Regional CEO of Americas
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Divisional & Regional Head
|
|
Pamela A. Thomas-Graham, Chief Talent, Branding & Communications Officer
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ShS Head
|
|
Eric M. Varvel, Joint Head of Investment Banking and Regional CEO of APAC
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Divisional & Regional Head
|
1 Effective January 1, 2014, Joachim Oechslin will succeed Tobias Guldimann as Chief Risk Officer and a member of the Executive Board
For further information on our Executive Board refer to the ‘Corporate Governance’ section in the ‘Corporate Governance and Compensation’ part of the Group Annual Report 2012 and any subsequent press release on changes in the Executive Board.
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1.1.9
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Resolution planning corporate governance structure and processes related to resolution planning
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Recovery and Resolution Office
The Recovery and Resolution Office, which is embedded in the global Chief Financial Officer (CFO) function, is responsible for managing the global RRP process, and overall responsibility for the global RRP is with the Group CFO. The Recovery and Resolution Office is responsible for, among other things, updating the RRP document at least annually (or more often as may be required under applicable regulations) and liaising with management and our Regulatory Affairs function on recovery and resolution related topics. The Recovery and Resolution Office is globally coordinated with representatives in each of the regions where we have specific RRP related regulatory requirements to fulfill – currently in Switzerland, the US and the UK.
The US, UK and APAC RRP regional governance follows the same principle as the global RRP governance. The executive responsible for the RRP is the Regional CFO for the Americas, EMEA or APAC, respectively. The Regional Chief Operating Officers (COOs) are responsible for maintaining relationships with the regulators and coordinating with them directly to ensure that all regulatory requirements are adequately addressed in the regions and delivered on a timely basis.
Preparation and Approval of the RRP
Any decisions on the RRP design and content have been discussed and agreed in the Design Authority, which met regularly and included key RRP subject matter experts. All decisions were subsequently presented to the RRP Steering Committee, whose members included the Group CFO (Chair) and other Executive Board members, as well as the RRP global program office, regional and divisional leads. The responsibilities of the RRP Steering Committee include, but are not limited to, providing executive-level decision-making and guidance with respect to the RRP program objectives. The RRP was presented to the Executive Board for review and approval, under delegated authority from the Group Board of Directors.
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1.1.10
|
Description of material management information systems
|
Credit Suisse utilizes a number of key management information systems and applications that directly support management, financial, risk, operational and regulatory reporting across the organization.
Reporting at Credit Suisse is categorized as follows:
|
n
|
Management reporting: Information required for board / senior management and executive level reporting
|
|
n
|
Financial reporting: Information required to provide financial position and performance to senior management and external users
|
|
n
|
Risk reporting: Information required to identify and analyze risks inherent in day-to-day business operations. Includes operational, credit and market risk reports
|
|
n
|
Operational reporting: Information required to provide detailed day-to-day activities at a transaction level to support key decisions on a daily basis
|
|
n
|
Regulatory reporting: Reports mandated by regulatory authorities governing the type of business and jurisdiction of operations
|
Credit Suisse has extensive reporting capabilities that allow for generation of key reports that are produced at defined frequencies during normal course of business. Reports can be produced at Group, business division, legal entity or function level depending on the purpose of the report.
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1.1.11
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High-level description of resolution strategy
|
The RRP has been developed in response to various regulatory requirements for the unlikely event of the Group’s failure. This section includes a high-level description of the resolution strategy included in our RRP for our operations in Switzerland, the US and the UK.
Switzerland
In September 2011, the Swiss Parliament passed the ‘Too Big to Fail’ legislation relating to systemically important financial institutions (SIFIs). The legislation became effective March 1, 2012. On January 1, 2013, the amended Banking Ordinance has been set into force. Under this legislation, SIFIs are required to establish a RRP and provide the RRP to FINMA for approval. We are required to update the report at least annually. The ‘recovery’ part of the RRP must outline recovery options available to a bank in various severe stress events, including those caused by idiosyncratic, systemic, capital or liquidity stress scenarios. The recovery plan’s purpose is to prepare for the survival of the bank in such stress scenarios. As a part of the plan, a governance framework must be defined with clear escalation and decision points and may be based on existing capital and liquidity plans. The ‘resolution’ part of the RRP must demonstrate that a bank can be unwound in an orderly fashion while ensuring the continuation of systemically relevant functions in Switzerland (including payment services and access to savings deposits) in the event of the bank’s impending insolvency. We have opted to meet the Swiss Emergency Plan requirements by pursuing a bridge bank strategy for our relevant functions in Switzerland and plan to implement a significant number of preparatory measures to support timely and effective resolution.
Under a resolution scenario, FINMA has significant power to act, including the authority to force the sale of all or part of a bank, the restructuring of a bank, or the creation of a bridge bank. In its August 7, 2013 position paper, ‘Resolution of Global Systemically Important Banks,’ FINMA announced that its preferred resolution strategy for CS would be a FINMA-led Single Point of Entry resolution strategy to re-capitalize and stabilize the bank. A single point of entry bail-in strategy would recapitalize CS at the top. The single point of entry should stabilize the Group and allow further restructuring as required in order to allow CS to continue the funding and capitalization of its subsidiaries and avoid resolution of operating subsidiaries.
United States
The rules governing the US RRP require that we contemplate the failure of Credit Suisse’s US operations under ordinary insolvency law (for Credit Suisse’s US operations, this means the US Bankruptcy Code, the Securities Investor Protection Act and the New York Banking Law), and not under the Orderly Liquidation Authority (OLA) provisions of Title II of the Dodd-Frank Act.
In assessing potential strategies for resolving our US operations under the applicable insolvency regimes, including the MLEs and CBLs, we have assumed that all MLEs (except service entities) fail at the same time. The RRP for the US focuses on two alternatives: the sale of MLEs, CBLs or business components and the orderly wind-down of MLEs and CBLs. The sale of MLEs, CBLs or business components would contemplate the maintenance of market operations and potentially, franchise value, although this strategy may prove challenging in the event of an extended period of distress. Certain legal entities, business lines or business components may be marketed individually or in package form. The range of potential purchasers may include other broker dealers and banks, as well as hedge funds. The wind-down of MLEs and CBLs would involve the liquidation of the positions remaining in inventory at the point of resolution. The actual unwind procedures would be determined based on a number of factors at resolution, including market conditions, current valuations, and the liquidity profile of the remaining portfolio. These strategies are not mutually exclusive; in resolution, US operations may be resolved under a combination of a sale of MLEs, CBLs or business components and a wind-down of remaining businesses and operations.
United Kingdom
The UK Banking Act of 2009 created a new framework for an insolvency regime focused on financial institutions that are in distress. The RRP guidance published by the FSA before it was abolished and succeeded by the PRA and FCA states that the relevant UK authorities will determine the strategy for resolving our UK operations, based on the information submitted to the authorities within our RRP. In our RRP, we have submitted information consistent with the guidance of the relevant UK regulators through June 30, 2013.
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Annexes
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Name / title of document
|
Applicable chapter section
|
|
No annexes exist for this chapter
|
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
CREDIT SUISSE GROUP AG and CREDIT SUISSE AG
|
||
|
(Registrant)
|
||
|
By:
|
/s/ Christian Schmid
|
|
|
Christian Schmid
|
||
|
Managing Director
|
||
| /s/ Claude Jehle | ||
| Claude Jehle | ||
| Date: October 3, 2013 |
Director
|