Credit Suisse: Lackadaisical about risk
Case Study

Credit Suisse: Lackadaisical about risk

4 pages
April 2022
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, Banking
2005-2012
Type
Published Sources
Copyright
© IMD 2022
Language
English
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