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Case Study

Credit Suisse: Lackadaisical about risk

By Didier Cossin and Mopesola Ogunsulire

4 pages

April 2022

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Reference: IMD-7-2363

When Archegos, a low-profile family office, lost money on its holding of ViacomCBS shares in March 2021, it faced margin calls it could not meet, forcing it to unwind its positions. Banks with $50 billion credit exposure to the firm scrambled to sell off about $20 billion of Archegos’s investments to cover the calls. One of the firm’s biggest creditors, Credit Suisse (CS), eventually booked the largest loss; $5.5 billion after making just $17.5 million in fees from Archegos the year before. A report commissioned to examine the causes of the scandal blamed the repeated failure to manage and mitigate the risks on a) a “lackadaisical” attitude towards risk and risk discipline; b) a lack of accountability for risk failures; c) business and risk staff who “systematically” ignored acute risks identified by their own systems, and d) a culture reluctant to undertake challenging discussions or escalate matters that posed significant financial and reputational risk to the bank.

Learning Objective

Sensitise board members to potentially huge damage that can come from failures in risk management and governance.

Keywords

Archegos, Prime Brokerage, Margin, Credit Loss, Risk Management, Finance

Settings

Europe, Switzerland
Credit Suisse, Finance and Insurance, Banking
2005-2012

Type

Published Sources

Available Languages

English

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This case study is part of a series

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