I'm speaking about this at a conference next week. Here is the MONEY QUOTE from Paul Weiss investigative report:
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...further, the various Risk Committees only had access to data that were four to six weeks old.
As a consequence, Risk was unaware of, and unable to fully appreciate in real time, the magnitude and pace of the exponential growth in Archegos’s positions...
<<<
I'd like to also point out that unlike the 2008 crisis with margin calls which were highly subjective based on difficult projections of housing prices and defaults and correlations (think AIG-FP), here, these were pretty simple equity swaps. Valuing these assets is not difficult
There are many interesting quotes, but for me this is the one that explains everything:
"Indeed, the 'Action/Decision' for Archegos was for CRM to 'notify of any changes with the counterparty and revisit the counterparty at afuture meeting.' CPOC did not set a deadline for remediating Archegos’s limit breaches, for moving Archegos to dynamic margining with add-ons, or even for reporting back or revisiting the status of Archegos at a futuremeeting."
The Archeos situation was escalated as far up as possible, up to this CPOC committee, where the Chief Risk Officer of the Investment Bank was a member. Instead of the CRO breathing down their neck until the situation was remediated, they got away with a bullet point in some minutes, without even a set deadline.
It appears that Credit Swiss replaced their CRO though.
>>> ...further, the various Risk Committees only had access to data that were four to six weeks old.
As a consequence, Risk was unaware of, and unable to fully appreciate in real time, the magnitude and pace of the exponential growth in Archegos’s positions... <<<
Ref: https://www.credit-suisse.com/about-us/en/reports-research/a...
I'd like to also point out that unlike the 2008 crisis with margin calls which were highly subjective based on difficult projections of housing prices and defaults and correlations (think AIG-FP), here, these were pretty simple equity swaps. Valuing these assets is not difficult