Two of the world's largest investment banks have warned that their profits are likely to be severely impacted by the slotxo crisis at U.S. hedge funds.Switzerland's second-largest bank, Credit Suisse, said it could have an impact. "Extremely important" to the next quarterly earnings.Japan's Nomura said it could earn $ 2 billion (£ 1.4 billion) from U.S. customers.The pair were hit by issues at hedge fund Archegos, which led to a multi-billion pound sale of shares on FridayHedge funds generate income from buying and selling stocks. It is thought that Archegos has made a large investment in some companies that have started to go wrong, and supporters have insisted on hastily raising money in what is known as a Margin Call, prompting an unusually large sale of its shares.A collateral call is when a bank asks a client to place more funds if some of the trades received on the loan are substantially reduced.If this can't be done, the lender sells shares in an effort to recover what it owes.
Joyful
Companies in the sales spree include big names such as ViacomCBS, Discovery, Tencent, Baidu and UK online retailer Farfetch.Investors at both banks were active, Credit Suisse fell 14 percent and Nomura closed 16 percent on Japanese exchanges.Fears about who will be hit by the matter have plunged stocks of other banks, including Deutsche Bank and Goldman Sachs, although they are much smaller.Credit Suisse's fortunes face the fallout of lending to Greensill Capital, a financial firm whose collapse poses a risk to Britain's Liberty Steel's future.
Loss of 'material'
In a statement released Monday, Credit Suisse said: "Major US hedge funds defaults on debt formed last week by Credit Suisse and some other banks.After the fund fails to meet these collateral obligations, Credit Suisse and a number of other banks are in the process of exiting these positions.Although at this time the exact magnitude of the losses incurred by this exit was premature. But it could be hugely important to our first quarter results.There is no name Archegos Capital Management which, although not a household name. But it is also a big player in the US market.It is the family investment company Bill Hwang, which was banned in 2014 from trading in Hong Kong and in 2012 settled insider trading fees in the United States.US hedge fund defaults will shake up global equities. Traders will have to think of the deaths two decades ago of Long Term Capital Management, a hedge fund that was one of Wall Street's only darlings to collapse in the late 1990s.
So much so that it has to organize support among the biggest players in the US financial industry. But before they step in, there is a horrible moment of uncertainty over whether the death of the fund may have caused a market crash.At first sight, Archegos was not seen to be another LTCM, but much smaller, and seems to handle more of the founders and traders' funds than for outside investors. But one of the lessons of the 2008 crash is that the financial world is deeply interconnected and it is difficult to measure the risks and trading positions of each hedge fund it creates.One curiosity of Archegos' default is Bill Hwang, a trader with a checkered ex.He was banned from the Hong Kong market in 2014, why did banks such as Credit Suisse and Nomura choose to have significant business. With his company, it will be of great interest to the top executives and shareholders of both institutions.
