Archegos, which was run by former hedge fund manager Bill Hwang, borrowed tens of billions of dollars from at least nine global banks to speculate on volatile stocks. The lenders have collectively lost more than $10 billion in the fallout.
According to a report by the Financial Times, despite extending billions of dollars of credit to Archegos, Credit Suisse made just $17.5 million from the relationship last year. The low level of fees and high risk exposure have caused concern among the board and senior executives, who are investigating the arrangement, according to two people with knowledge of the process.
The bank’s management is particularly alarmed after being told that Hwang was not a private banking client of the group, suggesting there was little incentive to pursue his prime brokerage business, the people told FT. According to the news article, Credit Suisse also demanded a margin of only 10 percent for the equity swaps it traded with Archegos and allowed the family office 10-times leverage on some transactions, according to people familiar with the trades and first reported by Risk.net.
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