Credit Suisse’s $ 5.5 billion Archegos success enters big league of bank losses

Credit Suisse Group AG

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The loss of 5.5 billion dollars of Archegos Capital Management places it in the court of banking misadventures with Nick Leeson, Jérôme Kerviel and the “whale of London”.

Archegos, the American family-owned investment firm of former Tiger Asia director Bill Hwang, took huge bets on a few stocks with money borrowed from Credit Suisse and other banks. When some important positions reversed and Archegos could not respond to margin calls, it triggered one of the biggest sudden losses in Wall Street history.

In addition to Credit Suisse, Nomura Holdings Inc.

warned investors of a loss of $ 2 billion from Archegos. Morgan Stanley wrote down $ 911 million linked to the company and Japanese bank Mitsubishi UFJ Financial Group warned of a loss of $ 300 million.

But Credit Suisse suffered the brunt of the damage. Its activity with Archegos was larger relative to its size than other banks, the Wall Street Journal reported.

Credit Suisse and Mr. Hwang had a long relationship. The bank was a prime broker for its hedge fund Tiger Asia Management. The fund pleaded guilty to electronic fraud charges related to insider trading in Chinese stocks in 2012, and Mr. Hwang was prevented by U.S. securities regulators from handling client money.


How would you rank the loss of Credit Suisse compared to other major banking mishaps? Join the conversation below.

“He’s probably a guy like me that you wouldn’t want to touch in the future. Yet they did, and the only reason for that was that there were huge fees generated by his business, ”Mr. Leeson said in an interview. “It’s neglect, it’s complacency, it’s people who don’t do their jobs well.”

Mr Leeson’s unauthorized transactions resulted in losses of $ 1.3 billion and the 1995 collapse of Barings Bank, one of Britain’s oldest investment banks. Mr Leeson, who was based in Singapore for the bank, pleaded guilty to charges related to the collapse there and served a sentence in a Singapore prison.

A spokesperson for Credit Suisse declined to comment. A spokesperson for Mr. Hwang declined to comment.

The loss of Archegos enters the pantheon of huge commercial losses of banks. Some were from fraudulent or unauthorized transactions. Some were big bets that went in the wrong direction.

Morgan Stanley mortgage trader Howard “Howie” Hubler was accused in 2007 of a loss of $ 9 billion that caused the New York-based securities firm to collapse when the financial crisis hit. erupted a year later.

Jérôme Kerviel, who admitted to having engaged in years of unauthorized trades, in Paris in 2008.


Franck Prevel / Getty Images

Societe Generale SA shocked world markets in 2008 by revealing that it had suffered a net loss of 4.9 billion euros, or 7.2 billion dollars at the time, after unwinding a series of bets placed by Mr. Kerviel . He admitted to engaging in years of unauthorized transactions, but said he was just trying to make money for the bank.

Paris secrets that UBS Group AG

trader Kweku Adoboli deteriorated during one of the most volatile stages of the European debt crisis in 2011, causing a loss of $ 2.3 billion. Mr. Adoboli was convicted of fraud and sentenced to seven years in prison.

In 2012, hedge fund managers and other investors, bewildered by unusual movements in credit markets, began to talk about a deep-pocketed trader dubbed the “London Whale”. London trader JPMorgan Chase & Co. at the center of the debacle, which resulted in losses of more than $ 6 billion for the bank, has been identified as Bruno Iksil. Years later, Mr. Iksil said he was made a scapegoat for operations “initiated, approved, mandated and monitored” by senior management.

Write to Simon Clark at [email protected]

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