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$17.5 Million In Revenue And $5.4 Billion In Losses: Archegos Was A 300x-Levered Time Bomb For Credit Suisse
by Tyler Durden
A bank s prime brokerage unit is
supposed to be a safe, reliable and predictable generator of revenue, resulting from modest-margin transactions with a bank s hedge fund client base. It s
safe because the bank s risk managers scour the bank s exposure to various hedge funds, and immediately flag any clients that become too big and a potential source of loss (it s also safe because the bank s prime brokerage management tends to make far less than the frontline Sales and Trading staff).
That is, at least, the theory. The practice, as the recent Archegos fiasco demonstrated, is anything but.
Credit Suisse made just $17.5m in Archegos fees in year
Troubled times for Switzerland s second biggest bank. Keystone / Urs Flueeler
Credit Suisse made just CHF16 million ($17.5 million) of revenue last year from Archegos Capital, the family office whose sudden collapse in March caused the Swiss bank $5.4 billion in losses, according to people with knowledge of the relationship.
This content was published on May 3, 2021 - 09:46
May 3, 2021 - 09:46
Owen Walker and Stepen Morris in London
The paltry fees Credit Suisse received from Archegos, whose implosion was one of the most devastating in recent history, raises further questions about the risks the lender was prepared to shoulder in pursuit of relationships with ultra-wealthy clients.
By Aaron Nicodemus2021-05-03T20:28:00+01:00
Credit Suisse’s board member in charge of its risk committee has stepped down as fallout from “unacceptable” losses in the wake of collapses at Archegos Capital and Greensill Capital continues to roil the Swiss-based bank.
Andreas Gottschling told the bank Friday he would not stand for re-election. Proxy adviser Glass Lewis and other investors had been urging shareholders to vote against extending his term. Gottschling served on the Credit Suisse board since 2017 and on the board of Credit Suisse International since 2018, according to his LinkedIn profile.
Board Member Richard Meddings, chair of Credit Suisse’s audit committee, replaces Gottschling as interim chair of risk.
GFG Alliance confident ahead of Credit Suisse court hearing
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Sanjeev Guptaâs GFG Alliance remains confident it can secure financing to keep its Australian steelmaking operations open as it prepares for its first hearing in a legal skirmish with Credit Suisse.
Mr Guptaâs legal counsel will appear in the NSW Supreme Court on Thursday for a directions hearing after Credit Suisse, via Citibank, filed an application for âwinding up in insolvencyâ against GFGâs OneSteel Manufacturing, which operates the Whyalla Steelworks, and GFGâs Tahmoor Coal.
Citibank acts as trustee for some US$1.6 billion ($2.1 billion) of GFG-related invoices that were packaged into bonds by the collapsed firm Greensill Capital and held in four supply-chain funds managed by Credit Suisse, which is trying to recover billions of dollars for more than 1000 investors who sank money into them.
Credit Suisse has ousted the head of its board’s risk committee after the Archegos and Greensill Capital scandals as António Horta-Osório, the bank’s new chairman, promised a reset of its risk