NEW YORK/ZURICH - In spring 2009, senior Credit Suisse executive Gaël de Boissard told colleagues at a strategy meeting that as the bank reshaped its bond trading business, they needed to remember the five stages of grief outlined decades ago by psychiatrist Elisabeth Kübler-Ross.
Denial would come first, followed by anger, bargaining, depression and finally acceptance, he said.
"It is hard to be present in every business line in a world where capital is expensive. You have to make some choices," de Boissard, now co-head of the Credit Suisse investment bank, said in an interview.
Credit Suisse has been among the most aggressive banks in paring back its fixed income, currency and commodities trading business after the financial crisis. The Swiss bank winnowed down the 120 product areas it traded in to around 80, through consolidating some businesses and exiting others altogether.
With Credit Suisse's strategy now well set, it could be a template for other European and US banks that are under increasing pressure from regulators to cut risk-taking, bank executives said.
Banks are being squeezed on at least two fronts. Revenues are down by a third since 2009, but funding costs are higher because regulators are forcing banks to rely less on cheap debt to finance themselves, said Philippe Morel, a consultant at the Boston Consulting Group.
The big banks cannot respond by buying one another - the way companies in the steel, auto and pharmaceutical industries have done to reduce excess capacity - because regulators do not want banks to get any bigger, Morel said. The only real option left for most major banks globally is to voluntarily shrink to be sufficiently profitable, he added.
Credit Suisse did not have a choice. The Swiss government, which was shocked by the near-collapse of UBS AG in 2008, moved earlier and more forcefully than other regulators to require banks to rely less on debt funding and more on equity, which can cushion them better against losses.