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Credit Suisse’s ‘Rogue Trader’ Bond Falls Short on Risk 

June 2, 2016

Jan-Henrik Foerster and Tom Beardsworth, Bloomberg Technology

Credit Suisse Group AG sold 220 million Swiss francs ($222 million) of bonds designed to offload potential losses on events like rogue trading, with some investors sidestepping the issue because of the incalculable risk.

The second-largest Swiss lender initially planned to sell as much as 630 million francs of the notes, three people familiar with the deal said when it was first marketed. Order taking was extended earlier this month, people with knowledge of the deal said, and insurance blog Artemis reported on May 17 the offer was being cut to about 200 million francs.

“We did look at the risk bond for some time and considered investing -- it’s definitely an interesting idea ” said Dirk Schmelzer, a money manager at Plenum Investments AG, an investment firm specializing in insurance-linked securities. “It would have been difficult to explain to our clients why we’d invest in such an instrument as the risks are hard to assess and difficult to remodel.”

An official at Credit Suisse in London declined to comment on the bond sale. The average deal size for new insurance-linked securities is about $260 million, according to data compiled by Swiss Re AG. Almost $7 billion of the notes were issued last year, the insurer said in a January report. Read more

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