“This incident demonstrates that banks are exposed to significant risks that are not necessarily related to macroeconomic or systemic financial shocks but can nonetheless lead to significant losses,” the central bank said in its 2021 Financial Stability Report.
The SNB noted that both banks, “but in particular Credit Suisse”, had suffered heavy losses.
UBS reported a loss of $ 774 million from Archegos.
Meanwhile, Credit Suisse’s investment bank lost more than $ 5 billion in the Archegos collapse, just on the heels of the collapse of more than $ 10 billion in client investments linked to the insolvent British financier Greensill.
While the SNB said Credit Suisse’s direct credit exposure to Greensill was significantly lower than its exposure to Archegos, it said the bank could still bear costs related to potential claims filed by customers.
“Whenever the failure of a single counterparty materially affects a bank, the issue generally has an operational risk dimension and the bank’s internal control processes must be reviewed,” added the Swiss central bank.
Both banks have proven to be resilient in the current difficult economic environment, which presented several risks to broader financial stability, the SNB said.
Other coronavirus mutations that may require additional or longer-lasting containment measures could delay a further recovery or even lead to another recession, compromising banks’ credit portfolios, the central bank added.
The SNB pointed to signs of stretching valuations in equity, credit and real estate markets in a number of countries, as well as historically high global government and corporate debt.