If some risk-control departments have been asleep, there is potential for trouble
Are there more Archegos Capital Managements out there? That is to say, are there more obscure investment firms, making highly concentrated bets using vast quantities of borrowed money, that can fail suddenly and inflict multi-billion losses on some of the world’s biggest banks?
If the answer is “no”, it’s tempting to sit back and enjoy a familiar tale of hubris and greed. Credit Suisse and Nomura, the main losers in this saga, plied Archegos with credit in their roles as “prime brokers”, or suppliers of services to hedge funds, and were stung. Archegos couldn’t meet calls to put up more capital after an out-sized bet on US media firm ViacomCBS went sour. Cue a $20bn fire-sale.
