{"id":118940,"date":"2021-03-30T00:17:21","date_gmt":"2021-03-30T00:17:21","guid":{"rendered":"https:\/\/precoinnews.com\/?p=118940"},"modified":"2021-03-30T00:17:21","modified_gmt":"2021-03-30T00:17:21","slug":"global-bank-losses-may-top-6-billion-on-archegos-downfall","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/markets\/global-bank-losses-may-top-6-billion-on-archegos-downfall\/","title":{"rendered":"Global bank losses may top $6 billion on Archegos downfall"},"content":{"rendered":"
TOKYO\/ZURICH\/NEW YORK (Reuters) – Global banks may lose more than $6 billion from the downfall of Archegos Capital, sources familiar with trades involving the U.S. investment firm said on Monday, as regulators and investors feared the episode would reverberate more widely.<\/p>FILE PHOTO: People are seen on Wall St. outside the New York Stock Exchange (NYSE) in New York City, U.S., March 19, 2021. REUTERS\/Brendan McDermid<\/figcaption>
Japan\u2019s Nomura and Credit Suisse of Switzerland warned of major losses from lending to Archegos for equity derivatives trades, triggering a worldwide sell-off in banking stocks.<\/p>\n
Morgan Stanley shares fell 2.6% and Goldman Sachs Group dropped 1.7%. Nomura shares closed down 16.3%, a record one-day drop, while Credit Suisse shares tumbled 14%, their biggest fall in a year. Deutsche Bank dropped 5% and UBS was off 3.8%.<\/p>\n
Losses at Archegos Capital Management, run by former Tiger Asia manager Bill Hwang, sparked a fire sale of stocks including ViacomCBS and Discovery on Friday, a source familiar with the matter said.<\/p>\n
\u201cThis is a challenging time for the family office of Archegos Capital Management, our partners and employees,\u201d company spokesperson Karen Kessler said in a statement. \u201cAll plans are being discussed as Mr. Hwang and the team determine the best path forward.\u201d<\/p>\n
Archegos was unable to meet banks\u2019 calls for more collateral to secure equity swap trades they had partly financed. After those positions fell sharply in value, lenders sold big blocks of securities to recoup what they were owed, the sources said.<\/p>\n
\u201cThis is the kind of thing that happens in a speculative environment. You start finding that things go wrong,\u201d said Richard Bernstein, chief executive of Richard Bernstein Advisors. \u201cWhen you have people making certain bets based on what has outperformed in the past and the tide turns they get burned. The question is how much leverage they used.\u201d<\/p>\n
Nomura, Japan\u2019s largest investment bank, warned of a possible $2 billion loss, while Credit Suisse said a default on margin calls by a U.S.-based fund could be \u201chighly significant and material\u201d to its first-quarter results.<\/p>\n
Two sources said Credit Suisse\u2019s losses were likely to be at least $1 billion. One of them said the losses could reach $4 billion, a figure also reported by the Financial Times. Credit Suisse declined to comment.<\/p>\n