Sources say that Charlie Gasparino, Credit Suisse, from FOX Business could make further changes in management while investigating the links with Archegos and Bill Hwang.
Credit Suisse Group AG has accumulated more than $ 20 billion in exposure to investments related to Archegos Capital Management, but the bank has struggled to monitor them before the fund is forced to liquidate many of its large positions, according to people familiar with the matter.
The US family investment firm’s bets on a collection of shares rose before the March crash, but parts of the investment bank did not fully implement systems to keep up with Archegos’ rapid growth, people said.
Credit Suisse chief executive Thomas Gottstein and risk-averse general manager Lara Warner, who recently left the bank, learned only of the bank’s exposure to Archegos in the days leading up to the forced liquidation of the fund, people familiar with the bank said. Neither Mr. Gottstein nor Mrs. Warner had any background knowledge as a major client prior to this, these people said.
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A Credit Suisse spokesman declined to comment.
The exhibition reveals for the first time the scope of Credit Suisse’s relationship with Archegos, which was revealed at the end of last month. Credit Suisse reported a loss of $ 4.7 billion, cut its dividend and said Ms Warner, the head of the investment bank and other employees would leave. Credit Suisse is also facing questions from US and European regulators about its relationship with Archegos and the rebate.
Archegos, a US family investment firm of former Tiger Asia manager Bill Hwang, has bet heavily on a few shares with money borrowed from banks. When some big positions reversed and Archegos failed to cope with margin calls, it triggered one of the biggest sudden losses in Wall Street history.
Bill Hwang, introduced in 2012, emigrated to the United States after attending high school in South Korea and continued to lead one of the largest hedge funds focused on Asia. PHOTO: EMILE WAMSTEKER / BLOOMBERG NEWS
Archegos distributed his bets to half a dozen banks. Others, including Nomura Holdings Inc. and Morgan Stanley, also reported large losses. Credit Suisse borrowed more from Archegos in relation to its size than other lending banks and was one of the last to come out, The Wall Street Journal reported earlier.
Inside the bank, top management now knows that the so-called notional exposure or underlying value of the assets it managed on behalf of Archegos was more than $ 20 billion, people familiar with the matter said.
Some in the bank’s family who were familiar with Archegos’ exposure believed it was a fraction of the estimated $ 20 billion, said one of the people familiar with the matter. “
Credit Suisse has failed to partially protect itself from its exposure to Archegos because it has not yet set up a system to monitor in real time how much a position created for the bank has grown as the prices of the underlying securities have changed, said people familiar with the matter.
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This system, known as dynamic margining, was not fully implemented in the division that oversaw Archegos’ investments in Credit Suisse, people said. One person said the bank had intended to migrate Archegos’ positions to that system in the spring.
Archegos made a large part of its investments through a derivative instrument called a total return swap. These are contracts brokered by Wall Street banks that allow the user to take over the profits and losses of a portfolio of shares or other assets in exchange for a fee. Using these swaps, Archegos took high stakes in ViacomCBS Inc., Discovery Inc. and a handful of other media and technology companies, while placing limited funds in advance, essentially borrowing from Credit Suisse and other Wall Street banks.
| Ticker | Security | The last one | Change | Change% |
|---|---|---|---|---|
| CS | CREDIT SUISSE GROUP AG | 10.38 | +0.09 | + 0.83% |
Because the stock price of many Archegos investments is changing rapidly, Credit Suisse could not fully monitor the bank’s risk without these systems, which are used by many other Wall Street banks, people familiar with the matter said.
A few days before banks began to quickly unload large blocks of Archegos holdings or holdings related to its swaps, Credit Suisse executives were confronted when and how aggressively to sell, some people said. Goldman Sachs Group Inc. and Morgan Stanley moved relatively quickly with large blocks of assets as the scale of hedge fund losses became apparent.
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Credit Suisse reports earnings in the first quarter on Thursday, when it expects to release more details about the total damage Archegos has suffered on its finances.
The Archegos crisis came just weeks after Greensill Capital, a UK finance firm that was deeply embroiled in Credit Suisse, filed for insolvency and left the bank in jeopardy.
Credit Suisse said its relations with both Archegos and Greensill needed “substantial additional review and control”. He said his board had formed a crisis team and hired outside help to investigate.
The investigations will also examine how the bank, after investing huge amounts of investment in risk control and supervision in recent years, has allowed itself to get involved in both situations. In the case of Greensill, the bank has reviewed the relationship several times in recent years, but has continued to expand its business with the company.