Credit Suisse
Credit Suisse Archegos Capital Losses
Estimated impact: $5.5B
Credit Suisse lost $5.5 billion when family office Archegos Capital defaulted on margin calls from highly leveraged total return swap positions. Despite receiving multiple internal warnings about Archegos's concentrated exposure, the prime brokerage division chose to maintain the profitable relationship rather than reduce limits.
Decision context
Whether to enforce margin requirements and reduce exposure to Archegos Capital as the family office's concentrated leveraged positions grew beyond normal risk thresholds.
Decision anatomy
Red = risk factor present · Green = protective factor present
The analysis below was produced from the pre-decision document only. No hindsight. This is what the platform would have surfaced if it had been running in 2021-01.
“Credit Suisse prime services risk committee reviewed Archegos Capital exposure in late 2020 and early 2021. The committee documented that Archegos's aggregate gross exposure across prime brokers exceeded $50B against reported family-office equity of ~$10B, implying effective leverage of 5-8x on concentrated single-stock positions. Credit Suisse's initial margin requirements on Archegos total return swaps were set materially below Goldman Sachs and Morgan Stanley — a competitive-intensity decision rather than a risk-based one. Earlier internal recommendations to raise margin were deferred pending relationship-revenue discussions.”
Source: Credit Suisse Special Committee Report on Archegos (Paul, Weiss, July 2021), pp. 26-58
Red flags detectable at decision time
- Initial margin below peer banks on identical counterparty — competitive-pricing decision overriding risk
- Knowledge that Bill Hwang's prior Tiger Asia vehicle settled SEC insider-trading charges in 2012
- Archegos aggregate gross exposure across prime brokers estimated at 5x+ reported family-office capital
- Prime services risk function did not have authority to force margin increases over relationship-banker objection
- CRO pushback on Archegos limits deferred to relationship-revenue discussions
Cognitive biases the platform would have flagged
Hypothetical analysis
DI would flag Credit Suisse's Archegos risk decisions as the canonical revenue-anchor override of risk function. The bank's below-peer margin was a commercially-motivated choice that a bias-adjusted process would have required competitive/risk trade-off documentation for — 'we accept $X of additional tail risk to compete with GS on this specific counterparty' should have been an explicit ratified decision, not an emergent drift. Hwang's 2012 SEC settlement made the halo-effect operative: 'we know this counterparty' overrode base-rate concern about concentrated leverage.
Biases present in the decision
★ Primary driver · Severity estimated from bias type and decision outcome
Toxic combinations
Reference class base rates
Across all 143 curated case studies in our library:
Lessons learned
- Revenue anchoring causes relationship managers to underweight risk signals when a client is highly profitable.
- Status quo bias in risk management means limits that should be tightened remain unchanged until it is too late.
- When multiple banks have the same exposure, the first to act minimizes losses while the last absorbs the worst.
Source: Credit Suisse Special Committee Report on Archegos (2021); SEC complaint against Archegos principals (Case Study)
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