Archegos, Credit Suisse and Other Modern Credit Failures

None of these five was a classic bubble. Each balance sheet worked in calm markets and failed when funding or collateral had to be paid in cash at once. Two turned on Additional Tier 1 (AT1) capital: perpetual bonds that count as bank capital because their terms let them be written down or converted into shares when capital falls below a trigger or a supervisor declares a point of non-viability (PONV). They pay a higher coupon for that risk.

IL&FS, 2018: long assets, short funding. Infrastructure Leasing & Financial Services funded projects that paid back over 20 to 25 years with borrowings that had to be repaid or rolled over far sooner. Group entities defaulted from July to September 2018 with debt above ₹91,000 crore, about $12.6 billion at ₹72.28 per dollar. On October 1, 2018, the government took control of the board through the National Company Law Tribunal. The IMF later noted that non-bank lenders and mutual funds faced liquidity strains after the default and that mutual funds cut their non-bank commercial paper by over 60%. SEBI let mutual funds move defaulted debt into a segregated portfolio from December 28, 2018, and from November 4, 2019, the RBI required large non-bank lenders to hold a liquidity coverage ratio reaching 100% by December 1, 2024, and capped net cumulative outflow gaps at 10%, 10% and 20% for the 1–7, 8–14 and 15–30 day buckets. Section 8.6: The Rise of Private Credit applies the lesson to private credit.

Yes Bank, 2020: AT1 sold like a deposit. On March 5, 2020, Yes Bank was placed under a moratorium, with withdrawals capped at ₹50,000, and the RBI superseded its board, citing failure to raise capital, loan losses, downgrades, deposit withdrawals and “serious governance issues.” State Bank of India bought up to 49% for ₹7,250 crore (about $0.97 billion) at ₹10 a share, and seven other lenders joined it: ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, Bandhan Bank, Federal Bank and IDFC First Bank. The administrator wrote ₹8,415 crore (about $1.13 billion at ₹74.55) of AT1 bonds to zero. SEBI found that 1,346 individuals had bought ₹679 crore of them, 8.1% of the total, some after closing fixed deposits, without being told the risks, and fined the bank ₹25 crore in April 2021. Since October 2020 only qualified institutional buyers may subscribe to new AT1 issues, in lots of at least ₹1 crore. The Bombay High Court quashed the write-down on January 20, 2023; the Supreme Court stayed that ruling and reserved judgment on February 26, 2026.

Archegos, 2021: leverage nobody saw whole. Section 8.7: Family Offices explains the mechanism. According to the SEC, the family office grew from about $1.5 billion of capital and $10 billion of exposure to more than $36 billion and $160 billion, 160 ÷ 36 = 4.4× gross leverage, mostly through total return swaps spread across prime brokers. When its stocks fell in late March 2021 and margin calls went unmet, banks disclosed losses of at least $10.4 billion within a month, including Credit Suisse $5.5 billion and Nomura $2.9 billion. Its founder was convicted in July 2024 and sentenced to 18 years; in July 2023 the Federal Reserve fined UBS $268.5 million and the Prudential Regulation Authority fined Credit Suisse £87 million.

UK LDI, 2022: hedged on value, short of cash. Section 5.6: VaR’s Limitations — What It Doesn’t Capture works the numbers for a leveraged liability-driven investment fund, and Volume III’s Part 10 traces the episode through pension balance sheets. After the September 23, 2022, Growth Plan the 30-year gilt yield rose 160 basis points in a few days; the largest daily rise since 2000 had been 29. LDI strategies holding over £1 trillion faced collateral calls, and the Bank of England expected forced sales of at least £50 billion against about £12 billion of daily trading. It bought £19.3 billion of gilts between September 28 and October 14 and had sold them by January 12, 2023. Scheme liabilities had fallen with gilt prices, so the problem was cash, not solvency; schemes had to raise collateral within days. In March 2023 the Financial Policy Committee set a minimum resilience of about 250 basis points.

Credit Suisse, 2023: a run on a bank that met its capital rules. Credit Suisse lost CHF 7.3 billion in 2022 and had net asset outflows of CHF 110.5 billion in the fourth quarter. After the March 2023 US bank failures, on March 19 UBS agreed to buy it for CHF 3 billion in UBS shares, backed by a CHF 9 billion federal loss guarantee and two Swiss National Bank liquidity facilities of up to CHF 100 billion each. Because that was “extraordinary government support,” FINMA ordered about CHF 16 billion of AT1 bonds written to zero under their “Viability Event” clause and an emergency ordinance, while Tier 2 bonds were not written down. The Bank of England said the next day that in the UK “AT1 instruments rank ahead of CET1.” On October 1, 2025, the Federal Administrative Court ruled the write-down unlawful, finding the bank had met its capital requirements; FINMA appealed. In June 2025 the Federal Council proposed full deduction of foreign subsidiaries from the parent’s Common Equity Tier 1, a senior managers regime and fining powers for FINMA.