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Credit Suisse Tightens Hedge Fund Lending As Senator Demands “Answers” From Banks On Archegos Blowup

Reports about regulators (including the SEC in the US and the FCA in the UK) grilling the banks involved in the Archegos Capital Management blow up emerged just days after the $20 billion “family office” suffered an epic margin call that sapped all of its capital as brokers dumped blocks of shares as fast as they could, even as Morgan Stanley and Goldman Sachs beat them to the punch.

As academics and former regulators chirped in the press about the need for more stringent reporting requirements for family offices (essentially private hedge funds comprising the wealth of a single individual or family), and more regulation of OTC derivatives trading, some joked that the main players would inevitably be dragged in front of the Senate Banking Committee for a hearing, as if they were the founders of Citadel, Robinhood or Facebook.

The world came one step closer to that reality Thursday when the FT reported that Sherrod Brown, a progressive Democrat from Ohio and chairman of the Senate Banking Committee had written to four major banks, including Goldman, Morgan Stanley, Credit Suisse and Nomura (based in Switzerland and Japan, respectively), seeking “answers” about how Archegos Capital managed to amass so much leverage without any of its prime brokers realizing the firm was repeatedly borrowing against the same collateral (for more on that, click here).

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