UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

March 25, 2011

Commission File Number 001-15244

CREDIT SUISSE GROUP AG

(Translation of registrant’s name into English)

Paradeplatz 8, P.O. Box 1, CH-8070 Zurich, Switzerland (Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F      Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes      No

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CREDIT SUISSE GROUP AG

(Registrant)

Date: March 25, 2011

By:

/s/ Tobias Guldimann

Tobias Guldimann

Chief Risk Officer

By:

/s/ David R. Mathers

David R. Mathers

Chief Financial Officer

For purposes of this report, unless the context otherwise requires, the terms “Credit Suisse,” “the Group,” “we,” “us” and “our” mean Credit Suisse Group AG and its consolidated subsidiaries. The business of Credit Suisse AG, the Swiss bank subsidiary of the Group, is substantially similar to the Group, and we use these terms to refer to both when the subject is the same or substantially similar. We use the term “the Bank” when we are only referring to Credit Suisse AG, the Swiss bank subsidiary of the Group, and its consolidated subsidiaries.

In various tables, use of “–” indicates not meaningful or not applicable.

1. Introduction
2. Capital
3. Risk exposure and assessment
4. Credit risk
5. Securitization risk
6. Market risk
7. Operational risk
8. Equity securities in the banking book
9. Interest rate risk in the banking book
List of abbreviations

1. Introduction

The purpose of this Pillar 3 report is to provide updated information as of December 31, 2010 on our implementation of the Basel II framework and risk assessment processes in accordance with the Pillar 3 requirements. This document should be read in conjunction with the Credit Suisse Annual Report 2010, which include important information on regulatory capital and risk management (specific references have been made herein to this document). Since January 1, 2008, Credit Suisse has operated under the international capital adequacy standards set forth by the Basel Committee on Banking Supervision, known as Basel II, as implemented by the Swiss Financial Market Supervisory Authority (FINMA).

In certain cases, the Pillar 3 disclosures differ from the way we manage our risks for internal management purposes and disclose them in the Annual Report. For further information regarding the way that we manage risk, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management (pages 119 to 140) in the Credit Suisse Annual Report 2010. For further information on economic capital, our core Group-wide risk management tool, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Treasury management (pages 115 to 118) in the Credit Suisse Annual Report 2010.

Certain reclassifications have been made to prior periods to conform to the current period’s presentation.

The Pillar 3 report is produced and published semi-annually, in accordance with FINMA requirements.

This report was verified and approved internally in line with our Basel II Pillar 3 disclosure policy. The Pillar 3 report has not been audited by the Group’s external auditors. However, it also includes information that is contained within the audited consolidated financial statements as reported in the Credit Suisse Annual Report 2010.

Scope of application

The highest consolidated entity in the Group to which Basel II applies is Credit Suisse Group. For further information on regulation, refer to I – Information on the company – Regulation and supervision (pages 35 to 42) and to III – Treasury, Risk, Balance sheet and Off-balance sheet – Treasury management (pages 109 to 113) in the Credit Suisse Annual Report 2010.

Principles of consolidation

For financial reporting purposes, our consolidation principles comply with accounting principles generally accepted in the US (US GAAP). For capital adequacy reporting purposes, however, entities that are not active in banking and finance are not subject to consolidation (i.e. insurance, real estate and commercial companies). These investments, which are not material to the Group, are treated in accordance with the regulatory rules and are either subject to a risk-weighted capital requirement or a deduction from regulatory capital. FINMA has advised the Group that it may continue to include equity from special purpose entities that are deconsolidated under US GAAP as tier 1 capital. We have also received an exemption from FINMA not to consolidate private equity fund type vehicles.

For a list of significant subsidiaries and associated entities of Credit Suisse, refer to Note 38 – Significant subsidiaries and equity method investments in V – Consolidated financial statements – Credit Suisse Group (pages 338 to 340) in the Credit Suisse Annual Report 2010.

Restrictions on transfer of funds or regulatory capital

We do not believe that legal or regulatory restrictions constitute a material limitation on the ability of our subsidiaries to pay dividends or our ability to transfer funds or regulatory capital within the Group.

For information on our liquidity, funding and capital management and dividends and dividend policy, refer to III – Treasury, Risk, Balance sheet and Off-Balance sheet – Treasury management (pages 96 to 118) in the Credit Suisse Annual Report 2010.

Capital deficiencies

The Group’s subsidiaries which are not included in the regulatory consolidation did not report any capital deficiencies in 2010.

2. Capital

For information on our capital structure, eligible capital and shareholders’ equity and capital adequacy refer to III – Treasury, Risk, Balance sheet and Off-Balance sheet – Treasury management (pages 101 to 110) in the Credit Suisse Annual Report 2010.

Regulatory capital is calculated and managed according to Basel II and used to determine BIS ratios and, according to the Swiss Capital Adequacy Ordinance, the FINMA capital requirement covering ratio. The main differences between the BIS and FINMA calculations are the multipliers used for certain risk classes and additional FINMA requirements for market risk. The main impact of the multipliers is related to credit non-counterparty-related risks, for which FINMA uses a multiplier of 3.0 versus 1.0 for BIS. The additional FINMA requirements for market risk are for Value-at-Risk (VaR) backtesting exceptions, where FINMA imposes higher multipliers than BIS for more than ten exceptions, and stress-test-based risk-weighted assets for hedge funds.

BIS ratios compare eligible capital by tier 1 and total capital with BIS risk-weighted assets whereas the FINMA capital requirement covering ratio compares total capital with FINMA required capital.

During the transition period from Basel I to Basel II, the capital requirements include a floor adjustment that limits the benefit received from conversion. For Credit Suisse Group, the floor adjustment only had an impact on the FINMA capital requirements.

Description of regulatory approaches

Basel II provides a range of options for determining the capital requirements in order to allow banks and supervisors the ability to select approaches that are most appropriate. In general, Credit Suisse has adopted the most advanced approaches, which align with the way that risk is internally managed and provide the greatest risk sensitivity. Basel II focuses on credit risk, market risk, operational risk, securitization risk and equity and interest rate risk in the banking book. The regulatory approaches for each of these risk exposures and the related disclosures under Pillar 3 are set forth below.

Credit risk

Basel II permits banks a choice between two broad methodologies in calculating their capital requirements for credit risk, the internal ratings-based (IRB) approach or the standardized approach. Off-balance-sheet items are converted into credit exposure equivalents through the use of credit conversion factors (CCF).

The majority of our credit risk is with institutional counterparties (sovereigns, other institutions, banks and corporates) and arises from lending and trading activity in the Investment Banking and Private Banking divisions. The remaining credit risk is with retail counterparties and mostly arises in the Private Banking division from residential mortgage loans and other secured lending, including loans collateralized by securities.

Under the IRB approach, risk weights are determined by using internal risk parameters. We have received approval from FINMA to use, and have fully implemented, the advanced internal ratings-based (A-IRB) approach whereby we provide our own estimates for probability of default (PD), loss given default (LGD) and exposure at default (EAD). We use the A-IRB approach to determine our institutional credit risk and most of our retail credit risk.

PD parameters capture the risk of a counterparty defaulting over a one-year time horizon. PD estimates are based on time-weighted averages of historical default rates by rating grade, with low-default-portfolio estimation techniques applied for higher quality rating grades. Each PD reflects the internal rating for the relevant obligor.

LGD parameters consider seniority, collateral, counterparty industry and in certain cases fair value markdowns. LGD estimates are based on an empirical analysis of historical loss rates and are calibrated to reflect time and cost of recovery as well as economic downturn conditions. For much of the Private Banking loan portfolio, the LGD is primarily dependent upon the type and amount of collateral pledged. For other retail credit risk, predominantly loans secured by financial collateral, pool LGDs differentiate between standard and higher risks, as well as domestic and foreign transactions. The credit approval and collateral monitoring process are based on loan-to-value limits. For mortgages (residential or commercial), recovery rates are differentiated by type of property.

EAD is either derived from balance sheet values or by using models. EAD for a non-defaulted facility is an estimate of the gross exposure upon default of the obligor. Estimates are derived based on a CCF approach using default-weighted averages of historical realized conversion factors on defaulted loans by facility type. Estimates are calibrated to capture negative operating environment effects.

We have received approval from FINMA to use the internal model method for measuring counterparty risk for the majority of our derivative and secured financing exposures.

Risk weights are calculated using either the PD/LGD approach or the supervisory risk weights (SRW) approach for certain types of specialized lending.

Under the standardized approach, risk weights are determined either according to credit ratings provided by recognized external credit assessment institutions or, for unrated exposures, by using the applicable regulatory risk weights. Less than 10% of our credit risk is determined using this approach.

Market risk

For calculating the capital requirements for market risk, the internal models approach (IMA) or the standardized approach is used. We have received approval from FINMA, as well as from certain other regulators of our subsidiaries, to use our VaR model to calculate trading book market risk capital requirements under the IMA. We apply the IMA to the vast majority of the positions in our trading book. We continue to receive regulatory approval for ongoing enhancements to the VaR methodology, and the VaR model is subject to regular reviews by regulators and auditors.

We use the standardized approach to determine our market risk for a small number of positions, which represent an immaterial proportion of our overall market risk exposure.

Operational risk

We have received approval from FINMA to use the advanced measurement approach (AMA) for measuring operational risk. Under this approach we have identified key scenarios that describe major operational risks relevant to us. Groups of senior staff review each scenario and discuss the likelihood of occurrence and the potential severity of loss. Internal and external loss data, along with certain business environment and internal control factors, such as self-assessment results and key risk indicators, are considered as part of this process. Based on the output from these meetings, we enter the scenario probabilities and severities into an event model that generates a loss distribution. Insurance mitigation is included in the capital assessment where appropriate, by considering the level of insurance coverage for each scenario and incorporating haircuts as appropriate. Based on the loss distribution, the level of capital required to cover operational risk can then be calculated.

Securitization risk

For securitizations, the regulatory capital requirements are calculated using IRB approaches: the ratings-based approach (RBA) and the supervisory formula approach (SFA).

Other risks

For equity type securities in the banking book, risk weights are determined using the IRB Simple approach based on the equity sub-asset type (qualifying private equity, listed equity and all other equity positions).

Regulatory fixed risk weights are applied to settlement and non-counterparty-related exposures. Settlement exposures arise from unsettled or failed transactions where cash or securities are delivered without a corresponding receipt. Non-counterparty-related exposures arise from holdings of premises and equipment, real estate and investments in real estate entities.

For other items, we received approval from FINMA to apply a simplified Institute Specific Direct Risk Weight approach to immaterial portfolios.

Risk-weighted assets
		2010						2009
end of		Ad- vanced		Stan- dardized		Total		Ad- vanced		Stan- dardized		Total
Risk-weighted assets (CHF million)
Sovereigns		5,495		–		5,495		6,616		–		6,616
Other institutions		1,443		–		1,443		1,414		–		1,414
Banks		20,268		74		20,342		19,939		72		20,011
Corporates		87,987		–		87,987		91,585		–		91,585
Residential mortgage		11,665		–		11,665		11,112		–		11,112
Qualifying revolving retail		319		–		319		300		–		300
Other retail		7,545		300		7,845		7,100		531		7,631
Other exposures		–		5,031		5,031		–		5,171		5,171
Credit risk 1		134,722		5,405		140,127		138,066		5,774		143,840
Market risk		17,647		1,277		18,924		16,728		730		17,458
Operational risk		33,662		–		33,662		32,013		–		32,013
Equity type securities in the banking book		12,471		–		12,471		14,264		–		14,264
Securitization risk		3,585		–		3,585		3,810		–		3,810
Settlement risk		–		922		922		–		1,565		1,565
Non-counterparty-related risk		–		7,380		7,380		–		7,141		7,141
Other items		–		1,631		1,631		–		1,518		1,518
Total BIS risk-weighted assets		202,087		16,615		218,702		204,881		16,728		221,609
Other multipliers 2		788		15,542		16,330		1,086		15,106		16,192
VaR hedge fund add-on 3		2,436		–		2,436		3,716		–		3,716
Total FINMA risk-weighted assets 4		205,311		32,157		237,468		209,683		31,834		241,517
1    For a description of the asset classes refer to section 4 - Credit risk.   2    Primarily related to credit non-counterparty-related risk.   3    The VaR hedge fund capital add-on is stress-test-based and was introduced by the FINMA in 2008 for hedge fund exposures in the trading book. This capital add-on is required for the FINMA calculation in addition to the VaR-based market risk capital charge already included in BIS capital. For further information, refer to section 6 – Market risk.   4    Excluding FINMA floor adjustment of zero and CHF 7,956 million in 2010 and 2009, respectively.

BIS and FINMA statistics
		Group				Bank
end of		2010		2009		2010		2009
BIS statistics
Tier 1 capital (CHF million)		37,725		36,207		35,310		34,695
Total eligible capital (CHF million)		47,799		45,728		47,569		46,320
Tier 1 ratio (%)		17.2		16.3		17.1		16.5
Total capital ratio (%)		21.9		20.6		23.1		22.0
FINMA statistics
FINMA required capital (CHF million) 1		18,997		19,321		17,856		18,316
Capital requirement covering ratio (%) 2		251.6		236.7		266.4		252.9
1    Calculated as 8% of total FINMA risk-weighted assets.   2    Including the FINMA floor adjustment, the capital requirement coverage ratio for the Group and the Bank would be 251.6% and 263.8% in 2010 and 229.1% and 242.1% in 2009, respectively.

3. Risk exposure and assessment

For information on risk governance, risk organization, risk types and risk limits, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management (pages 119 to 140) in the Credit Suisse Annual Report 2010.

4. Credit risk

General

For information on our credit risk management approach, ratings and risk mitigation and impaired exposures and allowances, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management (pages 129 to 139) in the Credit Suisse Annual Report 2010.

For regulatory purposes, we categorize our exposures into broad classes of assets with different underlying risk characteristics including type of counterparty, size of exposure and type of collateral. The asset class categorization is driven by Basel II regulatory rules. The credit asset classes under Basel II are set forth below and are grouped as either institutional or retail.

Institutional credit risk

– Sovereigns: exposures to central governments, central banks, BIS, the International Monetary Fund, the European Central Bank and eligible Multilateral Development Banks (MDB).

– Other institutions: exposures to public bodies with the right to raise taxes or whose liabilities are guaranteed by a public sector entity.

– Banks: exposures to banks, securities firms, stock exchanges and those MDB that do not qualify for sovereign treatment.

– Corporates: exposures to corporations (except small businesses) and public sector entities with no right to raise taxes and whose liabilities are not guaranteed by a public entity. The Corporate asset class also includes specialized lending, in which the lender looks primarily to a single source of revenues to cover the repayment obligations and where only the financed asset serves as security for the exposure (e.g., income producing real estate or commodities finance).

Retail credit risk

– Residential mortgages: includes exposures secured by residential real estate collateral occupied or let by the borrower.

– Qualifying revolving retail: includes credit card receivables and overdrafts.

– Other retail: includes loans collateralized by securities and small business exposures.

Other credit risk

– Other exposures: includes exposures with insufficient information to treat under the A-IRB approach or to allocate under the Standardized approach into any other asset class.

Gross credit exposures by regulatory approach and risk-weighted assets
		A-IRB						Stan- dardized		Total		Risk- weighted assets
		PD/LGD				SRW
end of		Pre- substitution	1	Post- substitution
2010 (CHF million)
Sovereigns		68,190		68,465		–		–		68,465		5,495
Other institutions		5,115		4,972		–		–		4,972		1,443
Banks		72,081		77,168		11		370		77,549		20,342
Corporates		194,878		189,659		1,949		–		191,608		87,987
Total institutional credit exposures		340,264		340,264		1,960		370		342,594		115,267
Residential mortgage		90,939		90,939		–		–		90,939		11,665
Qualifying revolving retail		192		192		–		–		192		319
Other retail		50,833		50,833		–		591		51,424		7,845
Total retail credit exposures		141,964		141,964		–		591		142,555		19,829
Other exposures		–		–		–		9,220		9,220		5,031
Total gross credit exposures		482,228		482,228		1,960		10,181		494,369		140,127
2009 (CHF million)
Sovereigns		64,295		63,517		–		–		63,517		6,616
Other institutions		5,503		5,411		–		–		5,411		1,414
Banks		71,578		77,327		31		362		77,720		20,011
Corporates		195,294		190,415		3,411		–		193,826		91,585
Total institutional credit exposures		336,670		336,670		3,442		362		340,474		119,626
Residential mortgage		90,150		90,150		–		–		90,150		11,112
Qualifying revolving retail		181		181		–		–		181		300
Other retail		48,457		48,457		–		916		49,373		7,631
Total retail credit exposures		138,788		138,788		–		916		139,704		19,043
Other exposures		–		–		–		7,901		7,901		5,171
Total gross credit exposures		475,458		475,458		3,442		9,179		488,079		143,840
1    Gross credit exposures are shown pre- and post-substitution as, in certain circumstances, credit risk mitigation is reflected by shifting the counterparty exposure from the underlying obligor to the protection provider.

Gross credit exposures and risk-weighted assets
		2010						2009
		End of		Monthly average		Risk- weighted assets		End of		Monthly average		Risk- weighted assets
Gross credit exposures (CHF million)
Loans, deposits with banks and other assets 1		302,088		305,385		71,565		303,883		337,635		81,911
Guarantees and commitments		72,074		76,781		27,881		56,985		47,296		20,796
Securities financing transactions		32,259		36,928		4,836		35,033		37,366		3,997
Derivatives		87,948		98,845		35,845		92,178		111,476		37,136
Total		494,369		517,939		140,127		488,079		533,773		143,840
1    Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.

Geographic distribution of gross credit exposures
end of		Switzerland		EMEA		Americas		Asia Pacific		Total
2010 (CHF million)
Loans, deposits with banks and other assets 1		135,613		69,013		78,129		19,333		302,088
Guarantees and commitments		13,753		23,482		32,508		2,331		72,074
Securities financing transactions		5,199		8,769		17,088		1,203		32,259
Derivatives		6,626		45,935		26,692		8,695		87,948
Total		161,191		147,199		154,417		31,562		494,369
2009 (CHF million)
Loans, deposits with banks and other assets 1		133,570		81,775		66,376		22,162		303,883
Guarantees and commitments		12,797		13,976		28,765		1,447		56,985
Securities financing transactions		8,784		9,785		15,689		775		35,033
Derivatives		5,503		48,039		29,599		9,037		92,178
Total		160,654		153,575		140,429		33,421		488,079
The geographic distribution is based on the country of incorporation or the nationality of the counterparty, shown pre-substitution.
1    Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.

Industry distribution of gross credit exposures
end of		Financial institutions		Commercial		Consumer		Public authorities		Total
2010 (CHF million)
Loans, deposits with banks and other assets 1		18,714		121,004		103,847		58,523		302,088
Guarantees and commitments		1,920		65,931		1,864		2,359		72,074
Securities financing transactions		14,639		14,270		34		3,316		32,259
Derivatives		38,275		39,347		1,551		8,775		87,948
Total		73,548		240,552		107,296		72,973		494,369
2009 (CHF million)
Loans, deposits with banks and other assets 1		26,490		122,428		99,663		55,302		303,883
Guarantees and commitments		1,771		52,546		1,282		1,386		56,985
Securities financing transactions		11,308		20,750		34		2,941		35,033
Derivatives		36,488		43,905		1,521		10,264		92,178
Total		76,057		239,629		102,500		69,893		488,079
Exposures are shown pre-substitution.
1    Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.

Remaining contractual maturity of gross credit exposures
end of		within 1 year	1	within 1-5 years		Thereafter		Total
2010 (CHF million)
Loans, deposits with banks and other assets 2		181,826		86,185		34,077		302,088
Guarantees and commitments		26,751		42,242		3,081		72,074
Securities financing transactions		32,254		0		5		32,259
Derivatives		34,733		51,799		1,416		87,948
Total		275,564		180,226		38,579		494,369
2009 (CHF million)
Loans, deposits with banks and other assets 2		172,494		95,560		35,829		303,883
Guarantees and commitments		25,879		30,026		1,080		56,985
Securities financing transactions		35,033		0		0		35,033
Derivatives		30,264		60,826		1,088		92,178
Total		263,670		186,412		37,997		488,079
1    Includes positions without agreed residual contractual maturity.   2    Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.

Portfolios subject to PD/LGD approach

Rating models

Rating models are based on statistical data and are subject to a thorough review before implementation. Each credit rating model has been developed by Risk Analytics & Reporting (RAR) or Credit Risk Management (CRM) and has been independently validated by Risk Model Validation (RMV) prior to use within the Basel II regulatory capital calculation, and thereafter on a regular basis. To ensure that ratings are consistent and comparable across all businesses, we have used an internal rating scale which is benchmarked to an external rating agency using the historical PD associated with external ratings.

At the time of initial credit approval and review, relevant quantitative data (such as financial statements and financial projections) and qualitative factors relating to the counterparty are used by CRM in the models and result in the assignment of a credit rating or PD, which measures the counterparty’s risk of default over a one-year period.

New or materially changed rating models are submitted for approval to the Risk Processes and Standards Committee (RPSC) prior to implementation. RPSC reviews the continued use of existing models on an annual basis.

CRM is an independent function with responsibility for approving credit ratings and limits, monitoring and managing individual exposures and assessing and managing the quality of the segment and business area’s credit portfolios. CRM and RAR report to the Chief Risk Officer.

Descriptions of the rating processes

For the purposes of internal ratings, we have developed a set of credit rating models tailored for different internal client segments in both Investment Banking and Private Banking (e.g., international corporates, financial institutions, asset finance, small and medium-sized entities, commodity traders, residential mortgages, etc.) and transaction types.

Counterparty and transaction rating process – international corporates, banks and sovereigns (primarily in the Investment Banking division)

Internal ratings are based on the analysis and evaluation of both quantitative and qualitative factors. The specific factors analyzed are dependent on the type of counterparty. The analysis emphasizes a forward looking approach, concentrating on economic trends and financial fundamentals. Analysts make use of peer analysis, industry comparisons, other quantitative tools and the judgment of credit experts.

For structured and asset finance deals, the approach is more quantitative. The focus is on the performance of the underlying assets, which represent the collateral of the deal. The ultimate rating is dependent upon the expected performance of the underlying assets and the level of credit enhancement of the specific transaction. Additionally, a review of the originator and/or servicer is performed. External ratings and research (rating agency and/or fixed income and equity), where available, are incorporated into the rating justification, as is any available market information (e.g., bond spreads, equity performance).

Transaction ratings are based on the analysis and evaluation of both quantitative and qualitative factors. The specific factors analyzed include seniority, industry and collateral. The analysis emphasizes a forward looking approach.

Counterparty and transaction rating process – Swiss corporates, mortgages and other retail (primarily in the Private Banking division)

For Swiss corporates and mortgage lending, the statistically derived rating models, which are based on internal data history of quantitative and qualitative factors, are supplemented by the judgment of credit experts. For mortgages, information about the real estate property, including loan-to-value ratio, is also considered. Collateral loans, which form the largest part of “other retail”, are treated according to Basel II rules with pool PD and pool LGD based on historical loss experience. Most of the collateral loans are loans collateralized by securities.

As a rule, the allocation of exposures to institutional or retail as outlined in the following tables is based on the different rating models, but also takes into account further explicit regulatory rules.

Relationship between PD bands and counterparty ratings
		PD bands (%)			1
		2010		2009
Counterparty ratings
AAA		0.000-0.022		0.000-0.023
AA		0.022-0.045		0.023-0.042
A		0.045-0.099		0.042-0.099
BBB		0.099-0.501		0.099-0.497
BB		0.501-2.528		0.497-2.471
B or lower		2.528-99.999		2.471-99.999
Default (net of specific provisions)		–		–
1    PD bands are subject to slight changes over time as a result of routine recalibrations of PD parameters.

Institutional credit exposures by counterparty rating under PD/LGD approach
end of 2010		Total exposure (CHF m)		Exposure- weighted average LGD (%)		Exposure- weighted average risk weight (%)	1	Undrawn commit- ments (CHF m)
Sovereigns
AAA		55,195		10.41		1.91		5
AA		8,852		49.89		19.77		0
A		949		48.51		26.43		20
BBB		2,830		55.76		44.88		–
BB		323		44.64		108.09		–
B or lower		314		48.68		161.74		–
Default (net of specific provisions)		2		–		–		–
Total credit exposure		68,465		–		–		25
Exposure-weighted average CCF (%) 2		99.87		–		–		–
Other institutions
AAA		–		–		–		–
AA		3,227		54.21		18.57		231
A		670		53.69		32.94		162
BBB		902		45.72		36.86		357
BB		110		46.48		91.78		8
B or lower		63		47.16		170.55		–
Default (net of specific provisions)		–		–		–		–
Total credit exposure		4,972		–		–		758
Exposure-weighted average CCF (%) 2		81.72		–		–		–
Banks
AAA		–		–		–		–
AA		23,751		53.64		14.25		27
A		40,383		53.89		17.91		146
BBB		8,738		53.52		49.26		365
BB		3,320		51.20		87.75		14
B or lower		777		39.47		138.67		7
Default (net of specific provisions)		199		–		–		–
Total credit exposure		77,168		–		–		559
Exposure-weighted average CCF (%) 2		96.28		–		–		–
Corporates
AAA		–		–		–		–
AA		38,866		44.66		13.65		12,223
A		50,136		50.37		23.80		15,028
BBB		44,773		41.46		38.92		11,115
BB		40,539		39.27		74.38		5,222
B or lower		13,543		32.83		116.03		3,282
Default (net of specific provisions)		1,802		–		–		56
Total credit exposure		189,659		–		–		46,926
Exposure-weighted average CCF (%) 2		83.28		–		–		–
Total institutional credit exposure		340,264		–		–		48,268
1    The exposure-weighted average risk weights in percentage terms is the multiplier applied to regulatory exposures to derive risk-weighted assets, and may exceed 100%.   2    Calculated before credit risk mitigation.

Institutional credit exposures by counterparty rating under PD/LGD approach (continued)
end of 2009		Total exposure (CHF m)		Exposure- weighted average LGD (%)		Exposure- weighted average risk weight (%)	1	Undrawn commit- ments (CHF m)
Sovereigns
AAA		45,229		16.42		2.89		3
AA		12,807		44.43		15.66		193
A		2,615		52.58		16.92		34
BBB		1,963		55.46		44.18		–
BB		425		46.10		98.33		36
B or lower		476		49.62		252.14		–
Default (net of specific provisions)		2		–		–		–
Total credit exposure		63,517		–		–		266
Exposure-weighted average CCF (%) 2		99.66		–		–		–
Other institutions
AAA		–		–		–		–
AA		3,415		51.76		16.74		92
A		513		51.25		29.20		87
BBB		1,272		49.52		33.44		532
BB		207		49.80		88.14		3
B or lower		–		42.41		146.86		–
Default (net of specific provisions)		4		–		–		–
Total credit exposure		5,411		–		–		714
Exposure-weighted average CCF (%) 2		83.65		–		–		–
Banks
AAA		–		–		–		–
AA		23,225		51.31		13.81		23
A		40,205		54.37		19.15		98
BBB		9,826		42.94		38.58		531
BB		2,752		45.38		86.61		35
B or lower		1,093		36.94		136.84		9
Default (net of specific provisions)		226		–		–		10
Total credit exposure		77,327		–		–		706
Exposure-weighted average CCF (%) 2		95.68		–		–		–
Corporates
AAA		–		–		–		–
AA		42,752		47.64		12.51		10,976
A		45,935		48.21		20.61		13,226
BBB		43,486		42.33		40.06		11,261
BB		40,031		37.81		74.04		4,324
B or lower		15,510		33.17		117.25		3,028
Default (net of specific provisions)		2,701		–		–		123
Total credit exposure		190,415		–		–		42,938
Exposure-weighted average CCF (%) 2		82.93		–		–		–
Total institutional credit exposure		336,670		–		–		44,624
1    The exposure-weighted average risk weights in percentage terms is the multiplier applied to regulatory exposures to derive risk-weighted assets, and may exceed 100%.   2    Calculated before credit risk mitigation.

Retail credit exposures by expected loss band under PD/LGD approach
end of 2010		Total exposure (CHF m)		Exposure- weighted average LGD (%)		Exposure- weighted average risk weight (%)	1	Undrawn commit- ments (CHF m)
Residential mortgages
0.00%-0.15%		79,372		16.69		8.38		365
0.15%-0.30%		6,801		23.43		26.39		59
0.30%-1.00%		4,151		28.19		47.23		33
1.00% and above		312		28.29		94.06		–
Defaulted (net of specific provisions)		303		–		–		1
Total credit exposure		90,939		–		–		458
Exposure-weighted average CCF (%) 2		99.23		–		–		–
Qualifying revolving retail
0.00%-0.15%		–		–		–		–
0.15%-0.30%		–		–		–		–
0.30%-1.00%		–		–		–		–
1.00% and above		191		60.00		157.31		–
Defaulted (net of specific provisions)		1		–		–		–
Total credit exposure		192		–		–		–
Exposure-weighted average CCF (%) 2		99.65		–		–		–
Other retail
0.00%-0.15%		45,754		53.37		9.73		923
0.15%-0.30%		923		50.23		31.61		144
0.30%-1.00%		1,661		35.71		43.07		165
1.00% and above		2,239		42.38		61.12		21
Defaulted (net of specific provisions)		256		–		–		3
Total credit exposure		50,833		–		–		1,256
Exposure-weighted average CCF (%) 2		95.24		–		–		–
Total retail credit exposure		141,964		–		–		1,714
1    The exposure-weighted average risk weights in percentage terms is the multiplier applied to regulatory exposures to derive risk-weighted assets, and may exceed 100%.   2    Calculated before credit risk mitigation.

Retail credit exposures by expected loss band under PD/LGD approach (continued)
end of 2009		Total exposure (CHF m)		Exposure- weighted average LGD (%)		Exposure- weighted average risk weight (%)	1	Undrawn commit- ments (CHF m)
Residential mortgages
0.00%-0.15%		77,635		14.49		7.57		481
0.15%-0.30%		7,759		23.09		26.11		35
0.30%-1.00%		4,038		26.73		46.29		14
1.00% and above		372		30.06		98.95		1
Defaulted (net of specific provisions)		346		–		–		4
Total credit exposure		90,150		–		–		535
Exposure-weighted average CCF (%) 2		98.52		–		–		–
Qualifying revolving retail
0.00%-0.15%		–		–		–		–
0.15%-0.30%		–		–		–		–
0.30%-1.00%		–		–		–		–
1.00% and above		179		60.00		157.31		–
Defaulted (net of specific provisions)		2		–		–		–
Total credit exposure		181		–		–		–
Exposure-weighted average CCF (%) 2		99.62		–		–		–
Other retail
0.00%-0.15%		43,330		51.46		9.00		571
0.15%-0.30%		817		61.64		35.92		238
0.30%-1.00%		1,862		42.31		46.68		171
1.00% and above		2,138		43.27		62.22		32
Defaulted (net of specific provisions)		310		–		–		4
Total credit exposure		48,457		–		–		1,016
Exposure-weighted average CCF (%) 2		95.04		–		–		–
Total retail credit exposure		138,788		–		–		1,551
1    The exposure-weighted average risk weights in percentage terms is the multiplier applied to regulatory exposures to derive risk-weighted assets, and may exceed 100%.   2    Calculated before credit risk mitigation.

Loss analysis – regulatory expected loss vs. cumulative actual loss

The following table shows the regulatory expected loss as of the beginning of the years compared with the cumulative actual loss incurred during the year ended December 31, 2010 and 2009, respectively, for those portfolios where credit risk is calculated using the IRB approach.

Analysis of expected loss vs. cumulative actual loss
		2010				2009
		Expected loss (beginning of year)		Cumulative actual loss		Expected loss (beginning of year)		Cumulative actual loss
Losses (CHF million)
Sovereigns		62		8		41		8
Banks		443		364		90		1,603
Other institutions		2		1		2		1
Corporates		1,607		1,312		1,300		1,570
Residential mortgages		183		116		214		98
Other retail (including qualifying revolving retail)		329		355		357		340
Total losses		2,626		2,156		2,004		3,620

Regulatory expected loss

Regulatory expected loss is a Basel II measure based on Pillar 1 metrics which is an input to the capital adequacy process. Regulatory expected loss can be seen as an expectation of average future loss as derived from our IRB models, and is not a prediction of future impairment. For non-defaulted assets, regulatory expected loss is calculated using PD and downturn LGD estimates. For the calculation of regulatory expected loss for defaulted accrual accounted assets, PD is 100% and LGD is based on an estimate of likely recovery levels for each asset.

Cumulative actual loss

Cumulative actual loss comprises two parts: the opening impairment balance and the net specific impairment losses for loans held at amortized cost and actual value charges providing an equivalent impairment measure for both fair value loans and counterparty exposures as if these were loans held at amortized cost (excluding any realized credit default swap gains). The actual value charges may not necessarily be the same as the fair value movements recorded through the consolidated statements of operations.

Cumulative actual loss can also include charges against assets that were originated during the year and were therefore outside of the scope of the regulatory expected loss calculated at the beginning of the year. Cumulative actual loss does not include the effects on the impairment balance of amounts written off during the year.

The average cumulative actual loss over the last two years would have been in line with the expected loss, however 2009 was impacted by substantial losses for banks.

The following table presents the components of the cumulative actual loss.

Cumulative actual loss
		2010								2009
		Opening impairment balance		Specific impairment losses		Actual value charges		Total actual loss		Opening impairment balance		Specific impairment losses		Actual value charges		Total actual loss
CHF million
Sovereigns		8		0		0		8		4		4		0		8
Banks		364		0		0		364		3		204		1,396		1,603
Other institutions		1		0		0		1		4		(3)		0		1
Corporates		684		(68)		696		1,312		867		181		522		1,570
Residential mortgages		107		9		0		116		92		6		0		98
Other retail		275		80		0		355		285		55		0		340
Total		1,439		21		696		2,156		1,255		447		1,918		3,620

Credit Model Performance – estimated vs. actual

The following tables present the forecast and actual PD, LGD and EAD CCF for assets under the IRB approach. Estimated values of PD, LGD and CCF reflect probable long-run average values, allowing for possible good and bad outcomes in different years. Because they represent long-run averages, PD, LGD and CCF shown are not intended to predict outcomes in any particular year, and cannot be regarded as predictions of the corresponding actual reported results.

Analysis of expected credit model performance vs. actual results – Private Banking
		PD of total portfolio (%)				LGD of defaulted assets (%)
		Estimated		Actual		Estimated		Actual
Corporates		0.74		0.37		48		23
Residential mortgages		0.46		0.19		27		8
Other retail		0.35		0.47		51		46
CCF of defaulted assets only disclosed on a total Private Banking basis. Estimated CCF: 23%; actual CCF: 24%.

Private Banking

Estimated PD, LGD and CCF for Private Banking are derived from a counterparty-weighted average from each model, and then directly mapped to the regulatory asset class or mapped using an exposure-weighted (model to asset class) average.

In the table above, the comparison between actual and estimated parameters for Private Banking is derived from the latest available internal portfolio reviews used within the model performance and validation framework and where possible, multi-year analysis is utilized.

Actual PDs for Corporate and Residential mortgage asset classes are below estimate as the through-the-cycle-model-calibration includes a margin of conservatism, whereas actual PD results are higher than estimate for Other Retail portfolios.

Actual LGDs results for Residential mortgage clients are materially below estimated LGD, reflecting a relatively cautious model calibration.

Analysis of expected credit model performance vs. actual results – Investment Banking
		PD of total portfolio (%)				LGD of defaulted assets (%)				CCF of defaulted assets (%)
		Estimated		Actual		Estimated		Actual		Estimated		Actual
Sovereigns		1.07		0.00		–		–		–		–
Banks		0.79		0.25		55		52		65		43
Corporates and other institutions		1.22		0.58		39		31		65		71

Investment Banking

Estimated and actual PD, LGD and CCF for Investment Banking are counterparty-weighted averages in the year, and then for the disclosed multi-year analysis, PDs are calculated on a simple average basis, whereas LGDs and CCF are then further counterparty-weighted across years.

The table above shows that realized LGD and CCF levels are in line with estimates for both Banks and Corporate asset classes. Realized default rates are below estimates, reflecting a margin of conservatism within the ratings. Relatively small sample sizes limit the usefulness of this analysis.

There were no sovereign defaults in the period under review.

Portfolios subject to the standardized and supervisory risk weights approaches

Standardized approach

Under the standardized approach, risk weights are determined either according to credit ratings provided by recognized external credit assessment institutions or, for unrated exposures, by using the applicable regulatory risk weights. Less than 10% of our credit risk is determined using this approach.

Supervisory risk weights approach

For specialized lending exposures, internal rating grades are mapped to one of five supervisory categories, each of which is associated with a specific risk weight under the SRW approach.

Equity IRB Simple approach

For equity type securities in the banking book, risk weights are determined using the IRB Simple approach, which differentiates by equity sub-asset types (qualifying private equity, listed equity and all other equity positions).

Standardized and supervisory risk weighted exposures after risk mitigation by risk weighting bands
end of		Standardized approach		SRW		Equity IRB Simple		Total
2010 (CHF million)
0%		3,332		1,158		0		4,490
1%-50%		2,565		316		0		2,881
51%-100%		4,284		354		0		4,638
101%-200%		0		45		3,264		3,309
201%-400%		0		87		1,701		1,788
Total		10,181		1,960		4,965		17,106
2009 (CHF million)
0%		1,945		700		0		2,645
1%-50%		2,609		349		0		2,958
51%-100%		4,625		730		0		5,355
101%-200%		0		736		3,541		4,277
201%-400%		0		927		2,052		2,979
Total		9,179		3,442		5,593		18,214

Credit risk mitigation used for A-IRB and standardized approaches

Credit risk mitigation processes used under the A-IRB and standardized approaches include on- and off-balance sheet netting and utilizing eligible collateral as defined under the IRB approach.

Netting

For information on policies and procedures for on- and off-balance sheet netting, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management (page 138) and to Note 1 – Summary of significant accounting policies in V – Consolidated financial statements – Credit Suisse Group (page 223) in the Credit Suisse Annual Report 2010.

Collateral valuation and management

The policies and processes for collateral valuation and management are driven by:

– a legal document framework that is bilaterally agreed with our clients; and

– a collateral management risk framework enforcing transparency through self-assessment and management reporting.

In substantially all cases, the valuation of the collateralized portfolio is performed daily. Exceptions are governed by the calculation frequency described in the legal documentation. The mark-to-market prices used for valuing collateral are a combination of firm and market prices sourced from trading platforms and service providers, where appropriate. The management of collateral is standardized and centralized to ensure complete coverage of traded products.

For the Private Banking mortgage lending portfolio, real estate property is valued at the time of credit approval and periodically afterwards, according to our internal directives and controls, depending on the type of loan (e.g., residential, commercial) and loan-to-value ratio.

Primary types of collateral

The primary types of collateral are described below.

Collateral securing foreign exchange transactions and OTC trading activities primarily includes:

– Cash and US Treasury instruments;

– G-10 government securities; and

– Gold or other precious metals.

Collateral securing loan transactions primarily includes:

– Financial collateral pledged against loans collateralized by securities of Private Banking clients (mostly cash and marketable securities);

– Real estate property for mortgages, mainly residential, but also multi-family buildings, offices and commercial properties; and

– Other types of lending collateral, such as accounts receivable, inventory, plant and equipment.

Concentrations within risk mitigation

Our Investment Banking division is an active participant in the credit derivatives market and trades with a variety of market participants, principally commercial banks and broker dealers. Credit derivatives are primarily used to mitigate investment grade counterparty exposures.

Concentrations in our Private Banking lending portfolio arise due to a significant volume of mortgages in Switzerland. The financial collateral used to secure loans collateralized by securities worldwide is generally diversified and the portfolio is regularly analyzed to identify any underlying concentrations, which may result in lower loan-to-value ratios. For further information on risk mitigation, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management (pages 132 to 134) in the Credit Suisse Annual Report 2010.

Credit risk mitigation used for A-IRB and standardized approaches
end of		Eligible financial collateral		Other eligible IRB collateral		Eligible guarantees /credit derivatives
2010 (CHF million)
Sovereigns		99		0		1,066
Other institutions		92		91		230
Banks		1,922		0		1,412
Corporates		8,371		21,606		22,758
Residential mortgages		3,141		69,106		45
Other retail		40,736		1,126		154
Total		54,361		91,929		25,665
2009 (CHF million)
Sovereigns		12		0		1,163
Other institutions		66		38		522
Banks		4,619		0		1,611
Corporates		6,912		22,430		23,102
Residential mortgages		2,911		71,923		350
Other retail		36,500		862		58
Total		51,020		95,253		26,806
Excludes collateral used to adjust EAD (e.g. as applied under the internal models method).

Counterparty credit risk

Counterparty exposure

Counterparty exposure arises from OTC derivatives, repurchase agreements, securities lending and borrowing and other similar products and activities. These exposures depend on the value of underlying market factors (e.g., interest rates and foreign exchange rates), which can be volatile and uncertain in nature.

We have received approval from FINMA to use the internal model method for measuring counterparty risk for the majority of our derivative and secured financing exposures.

Credit limits

All credit exposure is approved, either by approval of an individual transaction/facility (e.g., lending facilities), or under a system of credit limits (e.g., OTC derivatives). Credit exposure is monitored daily to ensure it does not exceed the approved credit limit. These credit limits are set either on a derivative loan equivalent (DLE) exposure basis or on a notional exposure basis. DLE is a form of potential future exposure calculation allowing a fair comparison between loan and unsecured derivative exposures. Secondary debt inventory positions are subject to separate limits that are set at the issuer level.

For further information on counterparty credit risk, including counterparty and transaction rating, credit approval process and provisioning, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management (pages 129 to 139) in the Credit Suisse Annual Report 2010.

Wrong-way exposures

Correlation risk arises when we enter into a financial transaction where market rates are correlated to the financial health of the counterparty. In a wrong-way trading situation, our exposure to the counterparty increases while the counterparty’s financial health and its ability to pay on the transaction diminishes.

Capturing wrong-way risk requires the establishment of basic assumptions regarding correlations within a given trading product. We have multiple processes that allow us to capture and estimate wrong-way risk.

Credit approval and reviews

A primary responsibility of CRM is the approval of new counterparty trading relationships and the subsequent ongoing review of the creditworthiness of the client. Part of the review and approval process is an analysis and discussion to understand the motivation of the client and to identify the directional nature of the trading in which the client is engaged. Credit limits are sized to the level of comfort the CRM officer has with the strategy of the counterparty, the level of disclosure of financial information and the amount of risk mitigation that is present in the trading relationship (e.g., level of collateral).

Exposure adjusted risk calculation

Material trades that feature high correlation risk have higher risk weighting built into the exposure calculation process compared to “right-way” trades.

– Purchased credit default swaps – Correlation exists where the counterparty and the underlying reference asset belong to the same group. In these cases, exposure is calculated assuming default and applying the recovery value of the underlying reference asset.

– Equity finance –If there is a high correlation between the counterparty and the underlying equity, exposure is calculated as full notional (i.e., zero equity recovery).

– Reverse repurchase agreements – Correlation exists where the underlying issuer and the counterparty are affiliated. In these cases, collateral used as an offset in the exposure calculation process is lowered to its recovery value.

Wrong-way risk monitoring

Regular reporting of wrong-way risk at both the individual trade and portfolio level allows wrong-way risk to be monitored and corrective action taken by CRM in the case of heightened concern.

– Country exposure reporting – Exposure is reported against country limits established for emerging market countries. As part of the exposure reporting process, exposures that exhibit wrong-way characteristics are given a higher risk weighting versus non-correlated transactions. This weighting results in a greater amount of country limit usage for wrong-way transactions.

– Counterparty exposure reporting – Transactions that contain wrong-way risk (e.g., repurchase agreements, equity finance) are risk weighted as part of the daily exposure calculation process. Correlated transactions utilize more of the credit limit.

– Correlated repurchase and foreign exchange reports – Monthly reports produced by CRM capture correlated finance and foreign exchange positions for information and review by credit officers.

– Scenario risk reporting – In order to capture wrong-way risk at the industry level, a set of defined scenarios are run on the credit portfolio each month. The scenarios are determined by CRM and involve stressing the underlying risk drivers to determine where portfolios are sensitive to these stressed parameters.

– Scenario risk reporting also covers client groups, particularly hedge funds, which are exposed to particular risk sensitivities and also may have collateral concentrations due to the direction and strategy of the fund.

Effect of a credit rating downgrade

On a daily basis, we monitor the level of incremental collateral that would be required by derivative counterparties in the event of a Credit Suisse ratings downgrade. Collateral triggers are maintained by our collateral management department and vary by counterparty. For further information on the effect of a one, two or three notch downgrade as of December 31, 2010, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Treasury management (page 100) in the Credit Suisse Annual Report 2010.

The impact of downgrades in the Bank’s long-term debt ratings are considered in the stress assumptions used to determine the conservative funding profile of our balance sheet and would not be material to our liquidity and funding planning. For further information on liquidity and funding management, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Treasury management (pages 96 to 100) in the Credit Suisse Annual Report 2010.

Credit exposures on derivative instruments

We enter into derivative contracts in the normal course of business for market making, positioning and arbitrage purposes, as well as for our own risk management needs, including mitigation of interest rate, foreign currency and credit risk. Derivative exposure also includes economic hedges, where the Group enters into derivative contracts for its own risk management purposes but where the contracts do not qualify for hedge accounting under US GAAP. Derivative exposures are calculated according to regulatory methods, using either the current exposures method or approved internal models method. These regulatory methods take into account potential future movements and as a result generate risk exposures that are greater than the net replacement values disclosed for US GAAP.

As of the end of 2010, no credit derivatives were utilized that qualify for hedge accounting under US GAAP. For further information on derivative instruments, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management (pages 136 to 139) and Note 30 – Derivatives and hedging activities in V – Consolidated financial statements – Credit Suisse Group (pages 284 to 292) in the Credit Suisse Annual Report 2010.

Derivative exposure at default after netting
end of		2010		2009
Derivative exposure at default (CHF million)
Internal models method		51,719		59,802
Current exposure method		36,229		32,376
Total derivative exposure		87,948		92,178

Collateral used for risk mitigation
end of		2010		2009
Collateral used for risk mitigation for the internal models method (CHF million)
Financial collateral - cash / securities		32,367		32,102
Other eligible IRB collateral		591		712
Total collateral used for the internal models method		32,958		32,814
Collateral used for risk mitigation for the current exposure method (CHF million)
Financial collateral - cash / securities		4,323		3,362
Other eligible IRB collateral		7		22
Total collateral used for the current exposure method		4,330		3,384

Credit derivatives that create exposures to counterparty credit risk (notional value)
		2010				2009
end of		Protection bought		Protection sold		Protection bought		Protection sold
Credit derivatives that create exposures to counterparty credit risk (CHF billion)
Credit default swaps		1,003.3		961.6		1,223.6		1,165.0
Total return swaps		5.5		1.2		6.0		1.6
First-to-default swaps		0.3		0.0		0.4		0.2
Other credit derivatives		3.1		14.6		2.0		15.2
Total		1,012.2		977.4		1,232.0		1,182.0

Allowances and impaired loans

The following tables provide additional information on allowances and impaired loans by industry and geographic distribution, changes in the allowances for impaired loans and the industry distribution of charges and write-offs.

Industry distribution of allowances and impaired loans
end of		Specific allowances		Inherent credit loss allowances		Total allowances		Loans with specific allowances		Loans with inherent credit loss allowances		Total impaired loans
2010 (CHF million)
Financial institutions		38		3		41		39		0		39
Commercial 1		503		198		701		973		166		1,139
Consumer		202		66		268		633		46		679
Public authorities		6		1		7		6		0		6
Total		749		268		1,017		1,651		212		1,863
2009 (CHF million)
Financial institutions		41		6		47		17		26		43
Commercial 1		724		298		1,022		1,261		227		1,488
Consumer		213		107		320		656		98		754
Public authorities		6		0		6		12		0		12
Total		984		411		1,395		1,946		351		2,297
1    Includes lease financing.

Geographic distribution of allowances and impaired loans
end of		Specific allowances		Inherent credit loss allowances		Total allowances		Loans with specific allowances		Loans with inherent credit loss allowances		Total impaired loans
2010 (CHF million)
Switzerland		563		199		762		1,118		182		1,300
EMEA		68		21		89		257		10		267
Americas		55		21		76		184		3		187
Asia Pacific		63		27		90		92		17		109
Total		749		268		1,017		1,651		212		1,863
2009 (CHF million)
Switzerland		685		234		919		1,151		281		1,432
EMEA		60		98		158		270		64		334
Americas		146		43		189		389		1		390
Asia Pacific		93		36		129		136		5		141
Total		984		411		1,395		1,946		351		2,297
The geographic distribution of impaired loans is based on the location of the office recording the transaction. This presentation does not reflect the way the Group is managed.

Changes in the allowances for impaired loans
		2010						2009
in		Specific allowances		Inherent credit loss allowances		Total		Specific allowances		Inherent credit loss allowances		Total
Changes in the allowances for impaired loans (CHF million)
Balance at beginning of period		984		411		1,395		1,167		472		1,639
Net additions/(releases) charged to income statement		23		(116)		(93)		376		(61)		315
Gross write-offs		(294)		0		(294)		(674)		0		(674)
Recoveries		63		0		63		63		0		63
Net write-offs		(231)		0		(231)		(611)		0		(611)
Provisions for interest		2		0		2		43		0		43
Foreign currency translation impact and other adjustments, net		(29)		(27)		(56)		9		0		9
Balance at end of period		749		268		1,017		984		411		1,395

Industry distribution of charges and write-offs
		2010				2009
in		Net additions/ (releases) charged to income statement		Gross write-offs		Net additions/ (releases) charged to income statement		Gross write-offs
Industry distribution of charges and write-offs (CHF million)
Financial institutions		(3)		0		9		0
Commercial 1		(131)		(181)		230		(574)
Consumer 1		41		(113)		71		(100)
Public authorities		0		0		5		0
Total		(93)		(294)		315		(674)
1    Includes lease financing.

5. Securitization risk

The disclosures in this section, which also considers the “Industry good practice guidelines on Pillar 3 disclosure requirements for securitization”, refer to traditional and synthetic securitizations held in the banking book and regulatory capital on these exposures calculated according to the Basel II IRB approach to securitization exposures. A traditional securitization is a structure where an underlying pool of assets is sold to a special purpose entity (SPE) which in turn issues tranched securities that are collateralized by, and which pay a return based on the return on, the underlying asset pool. A synthetic securitization is a tranched structure where the credit risk of an underlying pool of exposures is transferred, in whole or in part, through the use of credit derivatives or guarantees that serve to hedge the credit risk of the portfolio. Many synthetic securitizations are not accounted for as securitizations under US GAAP. In both traditional and synthetic securitizations, risk is dependent on the seniority of the retained interest and the performance of the underlying asset pool.

The Group is active in various roles in connection with securitization, including originator, investor and sponsor. As originator, the Group creates or purchases financial assets (e.g., residential mortgages or corporate loans) and then securitizes them in a traditional or synthetic transaction that achieves significant risk transfer to third party investors. The Group acts as liquidity provider to Alpine Securitization Corp. (Alpine), a multi-seller commercial paper conduit administered by Credit Suisse. In addition, the Group invests in securitization-related products created by third parties and provides interest rate and currency swaps to SPEs involved in securitization activity.

For further information on all traditional securitizations, including trading book, covering objectives, activities and accounting policies, refer to Note 32 – Transfers of financial assets and variable interest entities in V – Consolidated financial statements – Credit Suisse Group (pages 297 to 308) in the Credit Suisse Annual Report 2010.

Regulatory approaches

Regulatory exposures and capital requirements for securitization exposures are calculated in accordance with the Basel II IRB framework using either the RBA or the SFA, depending on the nature of the exposure.

Sources of external ratings for securitizations

External ratings used in regulatory capital calculations for securitization risk exposures are obtained from Fitch, Moody’s, Standard & Poor’s or Dominion Bond Rating Service.

Securitization exposures purchased or retained
		Traditional				Synthetic
end of		Sponsor		Other role		Other role		Total
2010 (CHF million)
Commercial mortgage loans		0		2,712		0		2,712
Residential mortgage loans		0		2,836		0		2,836
CDO		0		1,958		5,448		7,406
Other ABS		6,124	1	1,499		15		7,638
Total		6,124		9,005		5,463		20,592
of which subject to capital requirements								19,948
of which subject to deductions								644
2009 (CHF million)
Commercial mortgage loans		0		2,231		0		2,231
Residential mortgage loans		0		3,882		0		3,882
CDO		0		2,289		8,810		11,099
Other ABS		6,827	1	2,397		0		9,224
Total		6,827		10,799		8,810		26,436
of which subject to capital requirements								25,711
of which subject to deductions								725
1    Represents the liquidity facility provided to Alpine.

Synthetic structures predominantly represent structures where Credit Suisse has mitigated its risk by selling the mezzanine tranche of a reference portfolio. Amounts disclosed, however, are the gross exposures securitized and senior notes retained.

The following table represents the total amounts of banking book loans securitized by Credit Suisse that fall within the Basel II Securitization Framework and where the Group continues to retain at least some interests. As of the end of December 31, 2010 and December 31, 2009, the Group's economic interests in these securitizations were CHF 17.8 billion and CHF 22.5 billion, respectively.

Loans securitized by Credit Suisse Group in which the Group has retained interests
		Traditional				Synthetic
end of		Sponsor		Other role		Other role		Total
2010 (CHF million)
Commercial mortgage loans		0		5,271		0		5,271
Residential mortgage loans		0		2,833		0		2,833
CDO		0		4,018		9,980		13,998
Other ABS		6,124		1,077		0		7,201
Total		6,124		13,199		9,980		29,303
of which retained interests								17,815
2009 (CHF million)
Commercial mortgage loans		0		4,049		0		4,049
Residential mortgage loans		0		3,880		0		3,880
CDO		0		4,353		14,512		18,865
Other ABS		6,827		2,112		0		8,939
Total		6,827		14,394		14,512		35,733
of which retained interests								22,530

Losses related to securitizations recognized during the period
		Traditional				Synthetic
end of		Sponsor		Other role		Other role		Total
2010 (CHF million)
CDO		0		3		99		102
Total		0		3		99		102
2009 (CHF million)
CDO		0		0		105		105
Other ABS		21		0		0		21
Total		21		0		105		126

Impaired or past due assets securitized
		2010						2009
		Other role						Other role
end of		Traditional		Synthetic		Total		Traditional		Synthetic		Total
Impaired or past due assets securitized (CHF million)
CDO		0		392		392		0		608		608
Other ABS		75		0		75		130		0		130
Total		75		392		467		130		608		738

Risk-weighted assets related to securitization exposures
		2010				2009
end of		EAD purchased/ retained		Risk- weighted assets		EAD purchased/ retained		Risk- weighted assets
Risk-weighted assets related to securitization exposures (CHF million)
RBA		15,116		2,245		19,490		2,702
SFA		4,832		1,340		6,221		1,108
Total		19,948		3,585		25,711		3,810

Risk-weighted assets related to securitization exposures in the RBA by rating grade
		2010				2009
end of		EAD purchased/ retained		Risk- weighted assets		EAD purchased/ retained		Risk- weighted assets
Risk-weighted assets related to securitization exposures in the RBA by rating grade (CHF million)
AAA		14,096		1,507		17,786		1,904
AA		442		47		551		55
A		210		37		353		51
BBB		212		143		168		100
BB		156		511		632		592
Total		15,116		2,245		19,490		2,702

Risk-weighted assets related to securitization exposures in the SFA by risk weight band
		2010				2009
end of		EAD purchased/ retained		Risk- weighted assets		EAD purchased/ retained		Risk- weighted assets
Risk-weighted assets related to securitization exposures in the SFA by risk weight band (CHF million)
0%-10%		2,157		137		5,041		374
11%-50%		1,231		138		642		226
51%-100%		40		31		277		215
101%-650%		1,404		1,034		261		293
Total		4,832		1,340		6,221		1,108

Deductions from eligible capital related to securitization exposures
		2010						2009
end of		Credit enhancing interest only strips		Other exposures		Total		Credit enhancing interest only strips		Other exposures		Total
Deductions from eligible capital related to securitization exposures (CHF million)
Residential mortgage loans		0		4		4		0		2		2
CDO		0		209		209		0		168		168
Other ABS		0		431		431		0		555		555
Total		0		644		644		0		725		725

Securitization activity
		2010				2009
in		Amount of loans securitized		Recognized gain/(loss) on sale		Amount of loans securitized		Recognized gain/(loss) on sale
Securitization activity (CHF million)
Commercial mortgage loans - traditional		2,395		0		4,136		0
Residential mortgage loans - traditional		0		0		4,621		0
CDO - synthetic		0		0		2,395		0
Total		2,395		0		11,152		0

6. Market risk

The majority of market risk is managed under the IMA approach. For further information on market risk, including information on risk measurement and VaR refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management (pages 123 to 129) in the Credit Suisse Annual Report 2010. In addition, details on risk-weighted assets for market risk under the standardized approach, a description of the valuation process and details on the hedge funds capital add-on are included below.

Valuation process

The Basel II capital adequacy framework and FINMA circular 2008/20 provide guidance for systems and controls, valuation methodologies and valuation adjustments and reserves to provide prudent and reliable valuation estimates.

Financial instruments in the trading book are carried at fair value. The fair value of the majority of these financial instruments is marked to market based on quoted prices in active markets or observable inputs. Additionally, the Group holds financial instruments which are marked to models where the determination of fair values requires subjective assessment and varying degrees of judgment depending on liquidity, concentration, pricing assumptions and the risks affecting the specific instrument.

Control processes are applied to ensure that the reported fair values of the financial instruments, including those derived from pricing models, are appropriate and determined on a reasonable basis. These control processes include approval of new instruments, timely review of profit and loss, risk monitoring, price verification procedures and validation of models used to estimate the fair value. These functions are managed by senior management and personnel with relevant expertise, independent of the trading and investment functions.

In particular, the price verification function is performed by Product Control, independent from the trading and investment functions, reporting directly to the Chief Financial Officer, a member of the Executive Board.

The valuation process is governed by separate policies and procedures. To arrive at fair values, the following type of valuation adjustments are typically considered and regularly assessed for appropriateness: model, parameter, credit and exit-risk-related adjustments.

Management believes it complies with the relevant valuation guidance and that the estimates and assumptions used in valuation of financial instruments are prudent, reasonable and consistently applied.

For further information on fair value, refer to II – Operating and financial review – Core Results – Fair valuations (page 60) and – Critical accounting estimates – Fair value (pages 89 to 90) and Note 33 – Financial Instruments in V – Consolidated financial statements – Credit Suisse Group (pages 309 to 328) in the Credit Suisse Annual Report 2010.

Hedge funds

In 2008, FINMA introduced a stress-test-based capital add-on for hedge fund positions for Swiss banks using the IMA for trading book market risk. The capital add-on is based on the outcome of a series of stress tests taking into account the degree of diversification in the portfolio. These positions are also included in our VaR model, and the overall FINMA capital charge is the sum of the stress test add-on and the VaR.

Risk-weighted assets for market risk under the standardized approach
end of		2010		2009
Risk-weighted assets for market risk under the standardized approach (CHF million)
Interest rate risk		321		203
Equity position risk		301		148
Foreign exchange risk		597		355
Precious metals risk		11		8
Commodity risk		47		16
Total		1,277		730

7. Operational risk

For information on operational risk, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management (page 139) in the Credit Suisse Annual Report 2010.

8. Equity securities in the banking book

Overview

The classification of our equity securities into trading book and banking book is made for regulatory reporting purposes. The banking book includes all items that are not classified in the trading book.

Most of our equity securities in the banking book are classified as investment securities whereas the remaining part is classified as trading assets.

For equity type securities in the banking book, risk weights are determined using the IRB Simple approach based on the equity sub-asset type.

The numbers below present the balance sheet value of banking book equity investments and the regulatory exposures to which capital is applied. The main differences are the scope of consolidation (deconsolidation of private equity investments for capital adequacy purposes as we do not have a significant economic interest) and regulatory approaches such as the net-long calculation and the look-through approach on certain equity securities.

Risk measurement and management

Our banking book equity portfolio includes positions in hedge funds, private equity and other instruments that may not be strongly correlated with general equity markets. Equity risk on banking book positions is measured using sensitivity analysis that estimates the potential change in value resulting from a 10% decline in the equity markets of developed nations and a 20% decline in the equity markets of emerging market nations.

For further information on risk measurement and management of our banking portfolios, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management (pages 127 to 129) in the Credit Suisse Annual Report 2010.

Valuation and accounting policies of equity holdings in the banking book

For information on valuation and accounting policies of investment securities and trading assets, refer to Note 1 – Summary of significant accounting policies in V – Consolidated financial statements – Credit Suisse Group (pages 223 to 232) in the Credit Suisse Annual Report 2010.

Equity securities in the banking book
end of / in		2010		2009
Equity securities in the banking book (CHF million)
Balance sheet value of investments at fair value		15,891		24,425
Regulatory exposures 1		4,965		5,593
Fair value of regulatory exposures		4,977		6,135
Realized gains/(losses) 2		143		192
Cumulative unrealized gains/(losses) 2		(965)		(1,422)
Cumulative unrealized gains/(losses) included in tier 1 capital 2		(978)		(1,964)
1    Primarily privately held.   2    Gains/(losses) are reported gross of tax.

9. Interest rate risk in the banking book

Overview

We have systems and controls in place to manage interest rate risk in the banking book. Risk sensitivity figures are provided for the impact of a one basis point change in interest rates, which is one of the primary ways in which these risks are assessed for internal risk management purposes. In addition, we confirm that the economic impacts of an adverse parallel shift in interest rates of 200 basis points and a statistical 1 year, 99% confidence adverse change in yield curves are significantly below the threshold of 20% of eligible regulatory capital used by regulators to identify banks that potentially run excessive levels of non-trading interest rate risk. Given our low levels of interest rate risk in the banking book, we do not have any regulatory requirement to hold capital against this risk, nor do we expect that the regulators will apply such a requirement in the future.

Management strategy and process

The interest rate risk exposures in our non-trading portfolios arise from a number of sources, including funding maturity mismatches, money market activities, long-term debt issuance, liquidity holdings, equity investment strategy and exposures to credit spreads.

Most material non-trading interest rate risk arises from the financial intermediation activities of the Private Banking division, resulting in non-trading directional interest rate risk embedded in the balance sheet. Those risks are transferred from the originating businesses to Treasury. Treasury then manages the risk position centrally within approved limits using hedging instruments such as interest rate swaps.

While the risks associated with fixed maturity transactions are transferred to Treasury by individual back-to-back transactions, certain products such as variable rate mortgages or savings deposits cannot be transferred in this way as those products do not have direct market-linked interest rates or contractual maturities. The interest rate risk associated with these products, referred to as non-maturing products, is estimated using the methodology of replicating portfolios and transferred to Treasury on a pooled basis. Based on the past behavior of interest rates and volume changes, this methodology assigns the position balance associated with a non-maturing banking product to several time bands. The methodology is based, where possible, on the principle of finding a stable relationship between the changes of client rates of the non-maturing product and an underlying investment portfolio. Where this is not possible, the maturity of the product is assessed based on volume stability only. These schedules can then be used to evaluate the product's interest rate sensitivity. The structure and parameters of the replicating portfolios are reviewed periodically to ensure continued relevance of the portfolios in light of changing market conditions and client behavior. The methodology, maximum tenor and allocation of tranches in the replicating portfolios are ratified by the RPSC.

Interest rate risk also arises from the foreign exchange and interest rate positioning strategy with respect to our equity balance. The respective allocation strategy is defined by the Capital Allocation & Risk Management Committee and implemented by Treasury.

While the majority of our non-trading interest rate risk resides with Treasury or arises in conjunction with the interest rate positioning of our equity balance, some branches, subsidiaries and businesses also take on non-trading interest rate risk, which is managed within approved limits.

Risk measurement

The risks associated with the non-trading interest rate-sensitive portfolios are measured, monitored and limited using a range of tools, including the following key measures:

– Interest rate sensitivity (DV01): Expresses the impact of a one basis point (0.01%) parallel shift in yield curves on a portfolio's fair value. DV01 represents a transparent and intuitive (non-statistical) indicator of outright directional interest rate risk.

– Value-at-risk (VaR): Statistical indicator of the potential fair value loss, taking into account the probability of interest rate movements and observed correlations across yield curve tenors and currencies. In addition, VaR takes into account yield curve risk, spread and basis risks, as well as foreign exchange and equity risk. VaR is based on a ten-day holding period with a 99% confidence level for risk management and regulatory capital purposes. For both risk management VaR and regulatory VaR, we disclose one-day, 99% VaR, which is ten-day VaR adjusted to a one-day holding period based on a 99% confidence level.

– Economic capital: Similar to VaR, economic capital represents a statistical risk indicator, taking into account market risks and other sources of risk, including counterparty exposure. Economic capital is calibrated to a 1-year holding period with a 99% confidence level for risk management purposes.

– Economic value scenario analysis: Expresses the impact of a severe instantaneous change in interest rates on a portfolio's fair value. In particular, we assess compliance with regulatory requirements regarding appropriate levels of non-trading interest rate risk by estimating the economic impact of adverse 200 basis point parallel shifts in yield curves and adverse interest rate shifts calibrated to a 1-year holding period with a 99% confidence level and then relating those impacts to the total eligible regulatory capital. This analysis is performed for the Group and our major legal entities, including the Bank, on a monthly basis.

The measures listed above focus on the loss potential on a fair value basis taking into account the present value of all future cash flows associated with the current positions. Since non-trading books are not marked-to-market through earnings, the related accrual accounting impacts generally differ from the fair value impacts. In order to assess the risk profile in a manner consistent with the accounting basis, we periodically perform risk calculations of net interest income.

Risk profile

For information on the impact of a one basis point parallel increase of the yield curves and an adverse 200 basis point move in yield curves on the fair value of interest rate-sensitive banking book positions, refer to III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management (pages 127 to 129) in the Credit Suisse Annual Report 2010.

List of abbreviations

A
ABS		Asset-backed securities
A-IRB		Advanced Internal Ratings-Based Approach
AMA		Advanced Measurement Approach
B
BIA		Basic Indicator Approach
BIS		Bank for International Settlements
C
CCF		Credit Conversion Factor
CDO		Collateralized Debt Obligation
CRM		Credit Risk Management
D
DLE		Derivative Loan Equivalent
E
EAD		Exposure at Default
F
FINMA		Swiss Financial Market Supervisory Authority FINMA
I
IAA		Internal Assessment Approach
IMA		Internal Models Approach
IRB		Internal Ratings-Based Approach
L
LGD		Loss Given Default
M
MDB		Multilateral Development Banks
O
OTC		Over-the-counter
P
PD		Probability of Default
R
RAR		Risk Analytics & Reporting
RBA		Ratings-Based Approach
RMV		Risk Model Validation
RPSC		Risk Processes and Standards Committee
S
SFA		Supervisory Formula Approach
SPE		Special purpose entity
SRW		Supervisory Risk Weights Approach
U
US GAAP		Accounting principles generally accepted in the US
V
VaR		Value-at-Risk

Cautionary statement regarding forward-looking information

This report contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. In addition, in the future we, and others on our behalf, may make statements that constitute forward-looking statements. Such forward-looking statements may include, without limitation, statements relating to the following:

– our plans, objectives or goals;

– our future economic performance or prospects;

– the potential effect on our future performance of certain contingencies; and

– assumptions underlying any such statements.

Words such as “believes,” “anticipates,” “expects,” “intends” and “plans” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. We do not intend to update these forward-looking statements except as may be required by applicable securities laws.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other outcomes described or implied in forward-looking statements will not be achieved. We caution you that a number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include:

– the ability to maintain sufficient liquidity and access capital markets;

– market and interest rate fluctuations and interest rate levels;

– the strength of the global economy in general and the strength of the economies of the countries in which we conduct our operations, in particular the risk of continued slow economic recovery in the US or other developed countries in 2011 and beyond;

– the direct and indirect impacts of continuing deterioration or slow recovery in residential and commercial real estate markets;

– adverse rating actions by credit rating agencies in respect of sovereign issuers, structured credit products or other credit-related exposures;

– the ability of counterparties to meet their obligations to us;

– the effects of, and changes in, fiscal, monetary, trade and tax policies, and currency fluctuations;

– political and social developments, including war, civil unrest or terrorist activity;

– the possibility of foreign exchange controls, expropriation, nationalization or confiscation of assets in countries in which we conduct our operations;

– operational factors such as systems failure, human error, or the failure to implement procedures properly;

– actions taken by regulators with respect to our business and practices in one or more of the countries in which we conduct our operations;

– the effects of changes in laws, regulations or accounting policies or practices;

– competition in geographic and business areas in which we conduct our operations;

– the ability to retain and recruit qualified personnel;

– the ability to maintain our reputation and promote our brand;

– the ability to increase market share and control expenses;

– technological changes;

– the timely development and acceptance of our new products and services and the perceived overall value of these products and services by users;

– acquisitions, including the ability to integrate acquired businesses successfully, and divestitures, including the ability to sell non-core assets;

– the adverse resolution of litigation and other contingencies;

– the ability to achieve our cost efficiency goals and cost targets; and

– our success at managing the risks involved in the foregoing.

We caution you that the foregoing list of important factors is not exclusive. When evaluating forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, as well as the information set forth in our Annual Report 2010 – Additional Information – Risk Factors.