What happened?
In March 2021, positions held by the family office Archegos Capital Management fell sharply. Credit Suisse, one of its prime brokers, ultimately recorded approximately $5.5 billion in losses.
The Credit Suisse Group Board appointed a four-director Special Committee and retained Paul, Weiss and other advisers to investigate. The report published on July 29, 2021 was based on more than 80 interviews with current and former employees and the collection of more than 10 million Credit Suisse documents and other data.
A central point of the report is that Archegos’s risk was not invisible. Large and persistent limit breaches and other warning signals had been identified, and the Committee concluded that the risks were in plain sight by at least September 2020. Yet the business and Risk repeatedly failed to take decisive action.
Background overview: Credit Suisse (Wikipedia)
Twelve passages that stood out
The risk was already visible inside Credit Suisse. Yet the follow-ups assigned at one committee meeting were forgotten, a $150,000 systems change was never funded, and three calls about stronger collateral requirements were cancelled at the last minute. These twelve passages show what warnings, decisions and everyday operating practices looked like before Archegos defaulted.
Credit Suisse switched to a more forgiving 'Bad Week' scenario — and Archegos still remained well over the limit
Credit Suisse had historically monitored Archegos under a Severe Equity Crash scenario that assumed a 30% shock in developed markets and 45% in emerging markets.
At the end of August 2020, the Head of Prime Services Risk (PSR) asked for Archegos to be monitored instead under a more forgiving “Bad Week” scenario, assuming shocks of 20% and 30%. PSR argued that Archegos held large-cap, liquid names and that Credit Suisse had daily termination rights, making a shorter stress period more appropriate.
Credit Risk Management (CRM) accepted the change, but the report says Archegos still remained well in excess of its prescribed scenario limit under the more forgiving framework.
Bad Week was then used to monitor Archegos from September 2020 until late February 2021.
A risk analyst wrote that the people he trusted to 'have a backbone and push back' were gone
On September 3, 2020, the CRM analyst covering Archegos escalated concerns to his supervisor about Prime Services Risk’s management of the account.
He wrote that the New York PSR team was not adequately staffed to be reliable and that many of its most influential experienced contacts had left without adequate replacement.
He added that the people he had trusted to “have a backbone and push back” when coverage asked for zero margin were now gone.
The email continued that the team was being run by a salesperson learning the role and that he no longer considered PSR the best first-line risk function.
After a warning not to add longs, six swaps were extended two years at the same 7.5% margin
On August 25, 2020, CRM told PSR that, given Archegos’s potential exposure (PE) and scenario-limit breaches, the Delta One desk should not expand Archegos’s long positions at existing margin levels.
On September 1, CRM again stressed that the problem was broader than a handful of concentrated names: new or expanded longs would require higher margin.
Yet on September 9, Prime Financing allowed Archegos to renew six long swaps, worth $78 million in aggregate, for 24 months at a 7.5% margin.
The Special Committee found no evidence that the renewals at 7.5% were raised with or approved by CRM.
A $150,000 technology fix went unfunded; the Head of PSR followed up again on March 16
Archegos frequently used bullet swaps. Because the initial margin on those swaps remained static while the positions could appreciate, the effective margin rate could erode over time.
In August 2020, the Head of PSR and the Prime Financing IT team discussed technology that could calculate initial margin using current mark-to-market notional rather than the original trade cost.
One proposal, presented on September 3, was estimated to cost $150,000, but it had not been funded by the time Archegos defaulted.
Emails show that the Head of PSR did not follow up with the IT team on the proposal’s status until March 16, 2021. The fix was never implemented. The report also notes that applying it would have required client agreement.
The committee's follow-up items were never done, and the people involved did not remember them as action items
In September 2020, the Counterparty Oversight Committee (CPOC) reviewed Archegos as one of the Investment Bank’s more challenging counterparties.
Its minutes recorded two follow-ups: the business was to provide a risk-weighted asset (RWA) breakdown by credit line, and CRM was to show the shortfall between Archegos’s actual margin and the margin that would have been held under the standard Prime Brokerage methodology.
Neither follow-up was performed, and the CRM and PSR personnel involved with Archegos did not remember them as action items.
Archegos was not discussed by CPOC again for nearly six months. In the later investigation, one CPOC member described the committee as having no “teeth.”
Credit Suisse heard it alone lacked dynamic margining — but Archegos was still off the transition list
By September 2020, Credit Suisse had built platforms capable of dynamically margining Prime Financing swap portfolios. The first client moved onto the new system that month.
By the end of December, however, Archegos was not even among the clients listed for transition.
In October, the CRM analyst covering Archegos had learned from Archegos that Credit Suisse was the only one of its prime brokers not dynamically margining the swaps or the combined portfolio.
Archegos was added to the pipeline only on February 12, 2021 and marked high priority on February 26. The Head of PSR said he believed Archegos preferred to handle one initiative at a time, but could not explain why it was not prioritized immediately after a separate December transition had finished.
The rating model used 4–5x leverage instead of the Committee’s 6x estimate; 6x would have meant another downgrade
At the start of 2021, CRM carried out its retrospective annual credit review of Archegos. The revised hedge-fund rating model more heavily penalized high leverage, volatile returns and lack of diversification.
The Special Committee understood Archegos’s gross leverage at the time to be 6x.
The analyst running the model used a leverage input of 4-5x instead.
The analyst explained that Archegos’s short positions acted as high-beta hedges and that a 6x input would have been too punitive. The report says using 6x would have produced an additional one-notch downgrade.
The same review proposed a downgrade but raised the future-credit-exposure (PE) limit from $20m to $50m
The annual review recommended downgrading Archegos from BB- to B+, placing it in the bottom third of Credit Suisse’s hedge-fund counterparties by rating.
At the same time, Archegos’s PE stood at $46 million on January 8, already above the existing $20 million limit.
In the same review, Credit Suisse increased the PE limit from $20 million to $50 million.
The report says the normal guidance for a B+ hedge-fund counterparty was a maximum of $10 million. Archegos’s scenario limit was also increased, from $250 million to $500 million.
From the bank’s internal credit review
We believe an exception to the guideline is warranted given the size of the fund and given the liquid products traded […]Three conference calls were scheduled for March 19–23 — and Archegos cancelled all three at the last minute
In March 2021, Credit Suisse was still trying to move Archegos onto dynamic margining. An updated calculation sent on March 17 called for approximately $1.385 billion of additional day-one margin.
The next day, a PSR analyst requested a call to answer questions before the hoped-for implementation the following week. Archegos replied that the remaining issue was persuading Bill Hwang to agree and execute the documentation.
The Head of PSR scheduled three calls between March 19 and March 23; Archegos cancelled all three, each at the last minute.
All three calls had been scheduled for after the market close.
During talks to change margin calculations, $2.4 billion of excess margin was returned in nine days
While the dynamic-margining proposal remained unresolved, Archegos began calling excess variation margin it had historically kept at Credit Suisse.
Between March 11 and March 19, Credit Suisse paid $740 million, $650 million, $200 million, $76 million, $145 million, $230 million and $400 million.
The total was approximately $2.4 billion in nine days, with each request approved by the CRM and PSR analysts covering Archegos.
This does not mean Credit Suisse could simply refuse valid variation-margin requests. The report says Archegos was technically entitled to request even more than it did and that CRM and PSR believed Credit Suisse lacked a legal right to withhold variation margin owed.
The committee’s account
Although CS took comfort from its ability to raise margin on three-days’ notice, the business never seriously considered invoking this right, which it viewed as a “nuclear” option that could potentially end CS’s relationship with Archegos.On a day a risk analyst said not to renew them, more than $13 billion of swaps were renewed for 24 months
On March 12, 2021, Archegos asked to extend swaps that otherwise would have matured on March 29.
More than $13 billion of swaps were renewed for 24 months with the same initial margin.
Yet on that same day, the PSR analyst covering Archegos had specifically instructed a Delta One trader not to renew the swaps because discussions about moving Archegos to dynamic margining were still pending.
The Special Committee says Credit Suisse documents suggest the renewal was a mistake. It also states that the renewal itself did not change the ultimate outcome.
The investment-bank CEO and group chief risk officer recalled first hearing about Archegos the night it could not meet a $2.5 billion-plus margin call
On March 24, declines in ViacomCBS and Tencent Music pushed margin sharply against Archegos. Credit Suisse determined that it would make a margin call of more than $2.5 billion the next day.
On an evening call, Archegos’s CFO told Credit Suisse that the firm no longer had the liquidity to meet Credit Suisse’s coming call or the calls from its other prime brokers.
The matter was then escalated to the Investment Bank CEO and group chief risk officer (Group CRO).
The report says both recalled that this was the first time they had heard about Archegos.
That is presented as their recollection, not as an independent finding that neither had encountered the name before. The Committee also found that Archegos had appeared in multiple risk-committee materials before then, while escalation to senior leadership remained minimal.
What the report says about the background
The Special Committee did not describe Archegos as a case where risk systems simply failed to detect danger. Its report says the risks were identified and conspicuous. The recurring failure was to act on them: limit breaches remained unresolved, margin protections lagged the portfolio, and issues were not escalated with sufficient urgency.
The report points to risk culture, turnover and inexperience, unclear responsibilities, underinvestment in technology and weak challenge and escalation. It also documents several points where Credit Suisse possessed contractual rights or internal limits that could have reduced exposure but did not use them decisively.
The introduction and background draw on printed pages 1–2 and 129–148; each note cites its own supporting pages.
Corrections to this article
Note 03 now includes the pages for the earlier instructions (pp.83, 85). Note 04 preserves the client-agreement condition and cites p.146. Note 07 identifies six-times leverage as the Committee’s understanding rather than an unqualified fact, and note 12 retains the executives’ recollection. Note 11 adds p.136 for the report’s qualification that the renewal did not affect the ultimate outcome. Other references and the approximate $2.4 billion total were clarified.