Credit Suisse, seeking to free up capital while immersed in a costly overhaul, is pitching a plan to farm out some of its risk from potential losses linked to events like rogue trading and cybercrime, people with knowledge of the matter said.
Bloomberg News reports that the bank has approached bond investors, hedge funds and asset managers in recent months with the design for an instrument akin to catastrophe bonds that would cover operational losses between $3.6bn and $4.3bn, four people said, asking not to be identified because talks are private.
The insurance industry uses so-called cat bonds to limit exposure to disasters such as hurricanes and earthquakes. Investors get above-market yields for taking a chance on their money being wiped out.
The bank “would be the first to issue this kind of an investment to my knowledge,” said Jean Medecin, a member of the investment committee at Carmignac, an asset manager that oversees $59bn in assets. “If Credit Suisse succeeds with such an offer, more banks will follow suit.”
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