US regulatory scrutiny mounted today as Wall Street began to count the cost of losses sparked by the collapse of hedge fund Archegos Capital Management.
Shares in Credit Suisse fell a further three per cent, taking total losses to 16 per cent for the week, on fears about the losses linked to Archegos’ meltdown.
The collapse of the hedge fund, a family office run by former Tiger Asia manager Bill Hwang, could result in global banks losing $6bn (£4.4bn), sources told Reuters.
Analysts at JP Morgan have predicted losses of as much as $10bn, which they described as “well beyond normal unwinding scenario for the industry”.
They added that they expected a full disclosure by the end of the week from Credit Suisse, which previously warned of a significant hit.
Yesterday it emerged that Archegos had defaulted on margin calls, sparking potentially billions of dollars in losses for Credit Suisse and Nomura.
Following a huge sell-off of Archegos’ positions, regulatory scrutiny in the US over the incident began to ramp up.
The Securities and Exchange Commission (SEC), which yesterday said it was monitoring the situation, today asked Archegos’ brokers for more information on a meeting they held last week about the fund’s exposure, the Financial Times reported.
Last week Archegos’ brokers discussed trying to limit the impact of unwinding the firm’s positions, two sources close to the matter told Reuters.
However, no deal on how to do that was reached and Goldman Sachs sold a large block of between $3bn and $4bn worth of stock before the market opened on Friday — a trade Archegos agreed to, one of the sources said.
Credit Suisse and Japan’s Nomura are set to bear the brunt of the losses, though they have declined to comment on the scale of the losses.
Despite the impact on certain lenders, US banks overall were trading higher, with Morgan Stanley, Goldman Sachs, JP Morgan Citigroup all posting gains.