Credit Suisse said Monday that it could have incurred a “significant” loss as a result of a US-based hedge fund defaulting on margin calls made by it and other banks last week, while Nomura said it may lose USD 2 billion as a result of an occurrence with a US client.
Credit Suisse did not name the “important” hedge fund or the other banks involved, nor did it include any other information about what happened. According to news sources, the hedge fund is Archegos Capital Management, headquartered in New York. Credit Suisse and a number of other banks are in the process of exiting these positions as a result of the fund’s inability to reach these margin commitments, according to the company.
According to the Financial Times, Archegos had significant exposures to ViacomCBS and other Chinese technology stocks and was hard hit after the US media conglomerate’s stock dropped last week. A margin call happens when an investor borrows the money using their equity portfolio as leverage and then has to make up the difference when the stock price declines and the collateral becomes worthless.
“While it is premature to estimate the exact size of the loss arising from this exit at this time,” Credit Suisse said, “it is possible that it would be highly important and material to our first-quarter performance, given the positive trends reported in our trading statement earlier this month.”
According to Nomura, on Friday “an incident occurred” that could result in a loss of USD 2 billion for one of its US subsidiaries based on Friday’s market prices. The client was not named. “There will be no problems related to the activities or financial soundness” of Nomura or its US subsidiary, according to the bank.
The Archegos website was inaccessible at the time of publication.