Credit Suisse Fires Risk and Investment Bosses After Archegos Fiasco Ends in $4.7 Billion Loss

Heads have rolled at Credit Suisse after the investment bank suffered massive losses in the aftermath of the blowout of US hedge fund Archegos Capital Management last week.

The bank said two top executives are leaving it. Those fired are chief risk officer Lara Warner and its investment banking chief Brian Chin. The bank also cut executive bonuses after suffering major losses.

Credit Suisse, Switzerland's No. 2 bank, was among the last to take action before Archegos, a family-owned hedge fund, imploded following a billion-dollar margin call. Credit Suisse was forced to dump more than $2 billion worth of stock to seal its exposure to the investment fund controlled by Bill Hwang.

Credit Suisse
Credit Suisse Wikimedia Commons

Credit Suisse Launches Probe

Credit Suisse also launched an investigation into the Archegos losses. Credit Suisse shares rose 1.26 percent after the news of the drastic actions broke.

"The significant loss in our prime services business relating to the failure of a US-based hedge fund is unacceptable ... In combination with the recent issues around the supply chain finance funds, I recognise that these cases have caused significant concern amongst all our stakeholders," Credit Suisse's chief executive Thomas Gottstein said in a statement.

In the immediate aftermath of the folding up of Archegos, analysts had assessed that Credit Suisse would suffer total losses around $5 billion. On Tuesday, the investment banking giant said it is facing up to a $4.7bn loss from Archegos' fiasco.

The crisis unfolded last week when Archegos engaged in the fire sale of about $20 billion of assets after it defaulted on a margin call by Credit Suisse and others. With the value of securities in the margin account of Archegos dropping substantially due to bets that failed, the fund was forced to sell assets in a fire sale, which then created a wave of panic that resembled the Lehman Brothers crisis in 2008. The fire sale saw assets worth about $20 billion, mainly US and Chinese stocks, being sold.

Major investment banks like Deutsche Bank, UBS, Morgan Stanley, Goldman Sachs etc have been hit by the liquidation of Archegos but they avoided or limited the losses by cutting the exposure to Archegos assets in time.

Credit Suisse, which said it was expecting a $960 million loss for the first quarter, said it has cancelled a proposal for both short and long-term bonus awards for executives.

Who is Bill Hwang?


Archegos was founded by former equity analyst Bill Hwang, who started his Wall Street career in the 1990s. After having worked with hedge fund manager Julian Robertson's Tiger Management, he then launched his own fund Tiger Asia Management in the early 2000s. In 2012 he renamed Tiger Asia as Archegos Capital and made it a family office. The fund went on to become of the largest investors in Asian financial markets.