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.
- Sensitise board members to potentially huge damage that can come from failures in risk management and governance.
Credit Suisse, Finance and Insurance, Banking
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