Ref: IMD-7-2363

Case study

Reference: IMD-7-2363

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Credit Suisse: Lackadaisical about risk

Didier Cossin

By Professor Didier CossinDidier Cossin and Mopesola Ogunsulire

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, Credit Loss, Finance, Margin, Prime Brokerage, Risk Management
Settings Europe, Switzerland
Credit Suisse, Banking
Type Published Sources
Copyright ©IMD 2022
Language English
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Reference: IMD-7-2363

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Reference: IMD-7-2363

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