How Credit Suisse ignored Archegos warnings

Weeks before Archegos collapsed, Credit Suisse received what would turn out to be one of its final warnings from a junior analyst about the hedge fund’s impending disaster. Just as with earlier red flags, stretching back years, it was ignored. The risk analyst told a colleague in the department dealing with investment fund Archegos to try and act soon. He cautioned that if there is an issue, all brokers would be looking to exit simultaneously.

The episode is one in a series of failures detailed in a report commissioned by the bank that offers an unprecedented glimpse into dysfunctional workings of one of the globe’s largest banks to the wealthy. Its criticism is frank, blaming management failure, a focus on maximizing short-term profits and enabling of Archegos’s voracious risk-taking for failing to steer the bank away from catastrophe. Despite long-running discussions about Archegos, by far its largest hedge-fund client, Credit Suisse’s top management were apparently unaware, with the group’s chief risk officer and investment bank chief recalling hearing of it first on the eve of its collapse.

It is part of a wider drive by new chairman Antonio Horta-Osorio to reform the culture of the bank, after a series of previous scandals from spying on executives to its entanglement with doomed supply chain finance specialist Greensill. Despite generating modest profit, the bank reaped $16 million in revenue in 2020 and Archegos went on to build up a portfolio with Credit Suisse totalling nearly $24 billion. Archegos admitted to Credit Suisse that it had run short of liquidity.