For people who work on counterparty credit and on margin and collateral management, the Archegos event lets readers see how information on counterparties' positions was collected and how initial margin was set.

What happened

Archegos Capital Management was an investment firm that concentrated its investments in a small number of US and Chinese technology and media companies. It defaulted on March 26, 2021, causing losses of over USD 10 billion at several large banks. Most of the banks that took losses were outside the United States1.

The report of the Financial Stability Board (FSB) describes the event as marked by significant leverage through total return swaps (TRS) and by counterparty credit risk that was not priced properly2. A TRS is a transaction in which the entire return on an underlying asset, meaning gains and losses in its value plus income such as dividends and interest, is exchanged for an interest payment based on a floating rate. How it works is explained in Equity Swaps and Total Return Swaps.

The event is also on the timeline as Archegos Capital Management defaults (March 26, 2021).

The events in date order

Date Event
March 26, 2021 Archegos defaults
October 2021 US authorities substantially complete the implementation of the security-based swap regime
December 10, 2021 The Federal Reserve Board (FRB) issues the supervisory letter SR 21-19
July 9, 2025 The FSB issues its report

What the sources identified as the causes

The FSB report says that Archegos's counterparty banks did not have a full picture of its concentrated positions. As a result, initial margin was inadequate, and the add-ons for concentration and the limits on overall leverage were also insufficient3.

Family offices like Archegos largely fell outside the regulatory perimeter and were not subject to entity-level reporting4. In some jurisdictions, trades used to obtain synthetic leverage were also not subject to reporting. Some jurisdictions, such as the EU, the UK, and Hong Kong, did impose reporting obligations on the counterparty banks.

Key principals of Archegos were convicted of fraud and manipulation, including lying to their counterparties5.

The FRB issued the supervisory letter SR 21-19 in December 2021. The letter takes issue with three points6.

  • The practice of accepting incomplete and unverified information about a fund's strategy, concentration, and relationships with other counterparties when onboarding a fund and in periodic credit reviews.
  • Weak coordination and governance between risk management and the business.
  • Inadequate margin levels and risk sensitivity, and contract terms that stop firms from raising margin or unwinding trades quickly when a fund fails to meet a margin call.

What changed afterward

After the Archegos default, authorities in many jurisdictions collaborated on a supervisory response to weak risk management practices, and also worked on international guidance on counterparty credit risk management. US authorities issued supervisory guidance aimed at leverage providers, and in October 2021 substantially completed the implementation of the security-based swap regime7.

The relationship between margin payments and funding is explained in Funding Variation and Initial Margin.

Notes

  1. Federal Reserve supervisory letter SR 21-19 (December 10, 2021; revised January 9, 2026), opening paragraph. ↩

  2. FSB, "Leverage in Nonbank Financial Intermediation: Final report" (July 9, 2025), p. 6 (PDF p. 10). ↩

  3. FSB report, p. 7 (PDF p. 11). ↩

  4. FSB report, p. 7 (PDF p. 11) and footnote 11. Whether reporting obligations apply is described jurisdiction by jurisdiction. ↩

  5. FSB report, footnote 10. ↩

  6. SR 21-19, text (three concerns: information about funds, risk management and governance, and margin terms). ↩

  7. FSB report, p. 7 (PDF p. 11). ↩