Credit Suisse Just Couldn’t Say No to Archegos

Credit Suisse Just Couldn’t Say No to Archegos

The widespread and enduring failings in Credit Suisse Group AG’s risk management exposed by the Archegos scandal were laid out in all their gory detail on Thursday. The Swiss bank has started addressing each weakness one by one. What's needed is for these measures to coalesce into a total cultural overhaul.

The implosion of Archegos Capital Management came fast in March. Credit Suisse’s reckless support of the family office’s leveraged stock positions has cost it over 5 billion Swiss francs ($5.5 billion) directly after it was forced to liquidate its exposure. Yet the risks of such a blow-up had been mounting for years, according to an independent report into the crisis. Credit Suisse staff were aware but just let it happen.

Despite past controversies, Credit Suisse decided against imposing a heightened compliance framework on Archegos. And Archegos repeatedly got the better of the firm. This favored client persuaded the bank’s prime services business, which looks after hedge funds, to assess the riskiness of its portfolio differently. That meant it faced less onerous demands to post margin backing its levered positions. The risk managers in the prime business would impose some conditions for this special treatment, but still let Archegos operate outside this