Credit Suisse has written $2.85 billion off the value of some of its investments and suspended some traders after finding pricing errors in its accounts.
The bank's CEO Brady Dougan said most of the writedowns were the result of worsening market conditions in the first six weeks of the year, but he would not estimate how much was due to mistakes by traders, pending an internal review.
The bank said the writedowns would wipe $1 billion from its first quarter results, but it still expected to stay in profit for the quarter.
The writedown and errors are the latest in a string of shocks from global banks, including huge new sub-prime related exposures at rival UBS and a trading scandal exposed last month at France's Société Générale.
Mr Dougan said it appeared that the traders who were suspended had been slow to adjust the value of their trading portfolios to fast-moving developments in markets.
The shock revelation came only a week after the bank unveiled fourth-quarter net profit of $1.22 billion, and trimmed its sub-prime linked writedowns for 2007 to just over $2 billion, less than the charges so far this year.
Mr Dougan said he did not expect the writedowns and the investigation into mismarking to affect its 2007 results. He would not say how many traders had been suspended although only a few were involved.
Analysts reacted badly to the news, with one describing it as 'a disaster'. Credit Suisse had until now been relatively unscathed by the credit crisis. Its shares were down more than 7% in late trading in Zurich.
The revelations were particularly embarrassing for Credit Suisse, as it had only recently, after painful restructuring, shaken off a reputation for being accident-prone and springing unpleasant surprises on investors.
The writedowns announced today were across the range of Credit Suisse's exposures to commercial mortgage-backed securities (CMBS), retail mortgage-backed securities (RMBS) and collateralised debt obligations (CDOs), its spokesman said.
CDOs are repackaged securities with substantial exposure to US sub-prime mortgages, which have suffered a collapse in their value as borrowers have reneged on loans in record numbers.
