ECB-SSM Updates Its Supervisory Expectations For Prime Brokerage Services

QuickTake

The adage that prime brokers cannot fail has long been disproven - notably by the failures of Lehman, MF Global and many others that have since led to a flurry of legislative, regulatory and institutional reforms being put in place following the 2008 Global Financial Crisis (the GFC). Equally, the assumption that family offices are immune from solvency issues was also negated by the very rapid public downfall of Archegos Capital Management (Archegos).

What started with Archegos' widespread margin call defaults during March 2021 rapidly led to a loss of USD 20 billion in two days followed by arrests of Archegos' founders along with key individuals in the United States on charges of racketeering, conspiracy, securities fraud and wire fraud. For global banks (mostly non-Banking Union headquartered banks) exposed to this family office, this culminated in losses well in excess of USD 10 billion. Once again, despite global GFC reforms, opacity, increasingly