World banks may lose $6B due to Archegos Capital default

Global banks may lose more than $6 billion from the downfall of Archegos Capital, sources familiar with trades involving the US investment firm said, Report informs referring to Reuters.

The problems started last week when a disappointing stock sale by media giant ViacomCBS triggered devastating bank margin calls for Archegos, three sources familiar with the matter said.

Archegos was unable to meet banks’ 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.

The underlying shares were held by Archegos’ prime brokers, which lent it money and structured and processed its trades. They included Goldman Sachs, Morgan Stanley, Deutsche Bank, Credit Suisse and Nomura.

Unwinding the positions led banks to sell large blocks of stock. Shares of ViacomCBS and Discovery each tumbled around 27 percent on March 26, while US-listed shares of China-based Baidu and Tencent Music plunged as much as 33.5 percent and 48.5 percent last week.

Japan’s 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.

Morgan Stanley shares fell 2.6 percent and Goldman Sachs Group dropped 1.7%. Nomura shares closed down 16.3 percent, a record one-day drop, while Credit Suisse shares tumbled 14 percent, their biggest fall in a year. Deutsche Bank dropped 5 percent and UBS was off 3.8 percent.

Japan’s 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.