Credit Suisse Archegos probe reveals serious management shortfalls

A lack of accountability and weak internal controls to monitor risk drove Credit Suisse’s $5.5bn loss on investment fund Archegos, according to a damning review published on Thursday.

Law firm Paul Weiss, Rifkind, Wharton & Garrisson released the findings of an investigation into the lender’s investment in Archegos. It blamed the losses on poor risk management practices and a “lack of accountability”.

Read more: Credit Suisse appoints new chief risk officer after Greensill and Archegos scandals

The report was released alongside second quarter results which showed the bank suffered a near-80 per cent drop in profits, largely attributed to Achegos-associated losses.

Archegos rocked Wall Street and investors around the world after it collapsed due to highly leveraged bets souring. Losses amounted to around $10bn, with Credit Suisse booking the worst hits.

Net profits at Credit Suisse came in below analysts’ expectations as a result of the Archegoes-related losses, reaching $278m in the second quarter of this year, lower than the 334m Swiss Francs forecasted.

In response to the findings, the bank said it would “put risk management at the heart of our decision-making processes.”

The lender’s investment banking division slumped to a pre-tax loss, driven by a 41 per cent decline in revenues as traders reduced their exposure to the bank’s funds after the Archegos scandal.

Adjusted revenues from equity sales and trading posted a 17 per cent decline excluding Archegos. Fixed income sales and trading fell 33 per cent.

Read more: Credit Suisse takes measures to reduce counterparty risk following Greensill Archegos scandals