The Financial Times reports:
In a letter to UK bank chief executives, the BoE said its analysis of the circumstances of the Archegos failure had found “significant cross-firm deficiencies” in the way bank prime brokerage businesses allowed the fund to build up huge loans that it ultimately defaulted on.
Interesting. Perhaps our UK Shareholders’ letter had some effect! Or was it Eumaeus, who wrote.
We should also keep in mind that the regulatory models are calibrated to give a 1 in 1,000 years probability of default, so the suspicion arises that the models might not have been calibrated properly. In any case, it would be wise for Bailey and his fellow regulators overseas to look into this issue. Granting a little time to investigate, Bailey then needs to make a statement that he is either confident in the effectiveness of UK regulation in this regard or he is not: the Archegos/Credit Suisse episode is a warning shot across the bow.
?
It now looks as though he is not “confident in the effectiveness of UK regulation in this regard “. Oh dear. We thought the new and improved system of regulation would make the GFC the “crisis to end all crises”. But I am sure they will sort it all out.
[EDIT] The corresponding Dear CEO letter from Nathanaël Benjamin is here.