Goldman Sachs boss David Solomon said the bank took “prompt action” on the implosion of family office Archegos Capital that have left rivals nursing billions in losses and that he was “pleased with how the firm handled it”.
Despite acting as a prime broker to the family office of Bill Hwang, which rocked global markets when it unwound around $20bn in positions in prominent tech firms, Goldman Sachs has come away from the ordeal relatively unscathed.
“This was a case of an investor with highly concentrated and leveraged positions,” said Solomon during the bank’s first quarter earnings call. “This is not the first time we’ve seen a situation like this, and likely won’t be the last.”
Both Goldman and Morgan Stanley moved swiftly to offload blocks of assets connected to the former Tiger Asia manager Hwang, walking away with immaterial losses, while rivals Credit Suisse and Nomura have been forced to take sizable hits.
“We have robust risk management that governs the amount of financing we provide for these types of portfolios, our risk controls, all of which were put in place long before the March events, worked well,” said Solomon of Archegos. He added that it was a “a reflection of the engagement and communication of teams across Goldman Sachs, both in the business, and on the control side”.
Solomon said the Archegos event will lead to some soul searching in the industry: “These events raise reasonable questions around market practice and transparency, they are worthy of debate and we intend to play a constructive role in that dialogue.”
While Nomura said in a statement it expects to book a $2bn charge, Credit Suisse will book $4.7bn in costs related to the trades in the first quarter and has ousted key executives.
Credit Suisse’s chief risk officer, Lara Warner, is leaving the bank as a result of the incident, and it has also ousted Brian Chin, the chief executive of its investment bank, replacing him with former Bank of America corporate and investment banking head, Christian Meissner. Other senior exits in the unit include Paul Galietto, head of equities sales and trading, who will be replaced on an interim basis by Anthony Abenante and head of prime services risk, Parshu Shah.
Both Nomura and Credit Suisse are considering sweeping cuts to their prime broking units, where the losses were booked, Bloomberg reported. Meanwhile, the Swiss bank is also set to strip out hundreds of millions from its bonus pool in the first quarter, according to the Financial Times.
To contact the author of this story with feedback or news, email Paul Clarke