A Bank of England’s policymaker has urged that financial regulators today should have a cross-border inquiry into how the collapse of US investment fund Archegos cost banks more than $10bn.
Anil Kashyap, a BoE financial policy committee member, also warned that new European Union bank capital rules could have “tragic” outcomes if abused.
Archegos collapse in March is said to have been triggered by a sharp drop in share price of US media giant ViacomCBS.
The collapsed firm was technically a family office created to manage the wealth of billionaire hedge fund manager Bill Hwang, who paid a $44m insider trading-related settlement with the US Securities and Exchange Commission in 2012.
Following losses, the firm’s lenders were spooked and issued a margin call, which led to bank lenders all jumping ship at the same time.
Credit Suisse lost over $5bn and Japan’s largest investment bank Nomura lost a near $3bn – shares also plunged 14 and 16 per cent respectively.
Meanwhile, US banks like Goldman Sachs, which acted as brokers for Archegos, swallowed smaller losses.
“One wonders what the supervisors in the various countries knew about their banks’ exposure to Archegos,” Kashyap said in a speech at a Monetary Authority of Singapore and the Bank for International Settlements event.
Cross-border cooperation between regulators was needed “for a forensic investigation of what went wrong at the various brokers that were serving Archegos,” Kashyap continued.
The policymaker further added in the speech that this was his personal view, not a BoE policy position.