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Global Derivatives Awards 2019: Credit Suisse fights Europe’s corner

Credit Suisse’s differentiated approach to clearing has been much praised by clients this year. It combines the responsiveness of a boutique with the platform capabilities that allow its clients to scale. It has become a European champion in a business in danger of being dominated by US banks and is GlobalCapital’s Global Clearing Bank of the Year.

Credit Suisse’s derivatives clearing business stands out in a commoditised industry by being client focused, responsive and independent. Clients appreciate its high-touch approach in a rapidly evolving landscape, driven by new regulations and capital constraints. They also appreciate a European bank being fully committed to client clearing and thus offering more alternatives to the US firms that have seemed set for global domination in recent years.

The bedrock of Credit Suisse’s success is two decisions made in 2015 and 2016. Firstly, once the bank had recapitalised in 2015 the decision was made to allocate capital to the clearing business but in a strategic way. This allowed Credit Suisse to focus on what made money in a banking business focused on risk-weighted assets and leverage ratios.

Then, the bank outsourced most of the utility functions of its clearing business to fintech vendor FIS, allowing it to focus on the strategic, value-added elements of its business. This decision attracted criticism from rivals at the time, but despite some of those firms’ claims, Credit Suisse has effected the outsourcing while maintaining its control and oversight of the FIS functions. More importantly, key clients have not noticed any change in the high level of customer service that they enjoy.  

These two decisions have allowed it to offer a very different clearing business to that of other institutions.

“Our clients consider us to be their partner as opposed to a counterparty, hence we are a first port of call for them,” says John Dlubac, director and head of EMEA prime derivative services in London.

“Key to this is that our clearing business is independent of other broader derivatives business in the bank. Our interests are aligned with client needs, not other derivatives desks. But at the same time, we have been very candid with our clients about issues such as capital ratios and what drives the business for us.”

This year a lot of work has gone into optimising the bank’s platform and streamlining its onboarding processes. This has allowed it to quickly and robustly add new clients and meet their needs in scale. This model has spurred growth that powered the firm to become the number two clearer of interest rate swaps at LCH, by trade count, in 2018.

But it is not just scale that matters to clients, but speed too. And this year Credit Suisse’s focus on innovation and being at the forefront of the clearing market meant that it was ready for day one clearing of FX non-deliverable forwards and new interest rate swap currencies. It was also the first to offer bunched order workflows, swap agency execution and cleared swaptions to its clients.

A case in point is how it is working with clients to prepare for the advent of FX clearing. The firm has hosted numerous events to prepare its client base for what is coming and has produced regular thought leadership pieces and market updates. “We are telling our clients what this all means to them and we take a very consultative approach,” says Dlubac.

“We don’t have a crystal ball, but we do have a good idea where the market is going and what the hurdles might be.”

In many ways Credit Suisse sees itself as a convenor within the clearing business, with good relationships with both the clearing houses and its clients, as well as the burgeoning fintech ecosystem that has sprung up around the market. It takes the clearing business seriously and on its own merits — an approach that resonates with its growing client base.

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