Credit Suisse sells credit derivatives portfolio amid restructuring

Credit Suisse plans to further downsize its derivatives portfolio in a bid to avoid higher capital charges.

Credit Suisse has sold a portfolio consisting of 54,000 credit derivatives trades, as the Swiss bank looks to continue to offload its risky assets.

According to its quarterly results, the bank executed the sale of its entire credit derivatives trades, reducing its leverage exposure by $5 billion as it plans to further downsize its derivatives portfolio.

Reports from Bloomberg and Wall Street Journal suggest that Citi has bought the portfolio, which has a gross notional value of $380 billion.

“The sale of our CDS portfolio resulted in a $5 billion reduction in leverage exposure in the second quarter and we also saw reductions in the quarter in our derivatives business in the form of novations, restructuring and early terminations,” said David Mathers, chief financial officer, Credit Suisse in an earnings call.

A spokesperson for Citi and Credit Suisse declined to comment.

The sale of the portfolio is the latest move from the bank following its decision to add assets from its equity derivatives and prime services businesses to its Strategic Resolution Unit (SRU), a unit focused on the offloading of unwanted assets.

The portfolio, which consisted of credit default swaps (CDS), would have caused the bank to be hit by higher capital requirements under the incoming Basel III rules.

Credit Suisse is the latest European bank to offload the risky derivatives following intense pressure to reduce its leverage exposure.

In 2014, Deutsche Bank announced it will stop trading single-name CDS derivatives, as new banking regulations hit the profitability of the business.

In January last year, Citi bought Deutsche Bank’s single-name CDS portfolio with a notional value of around $250 billion, according to a report from