Banking

Sherrod Brown seeks answers from banks linked to Archegos

Senate Banking Committee Chairman Sherrod Brown asked banks involved with Bill Hwang’s Archegos Capital Management to explain their role in the firm’s implosion.

Credit Suisse Securities, Nomura Holding America, Goldman Sachs Group and Morgan Stanley should respond with “answers about the margin call and market activity connected to Archegos,” according to a letter to the firms released Thursday by the Ohio Democrat.

“I am troubled, but not surprised, by the news reports that Archegos entered into risky derivatives transactions facilitated by major investment banks,” Sen. Sherrod Brown wrote in a letter to four firms.

Andrew Harrer/Bloomberg

Brown compared the forced sales by Hwang’s family office to Long-Term Capital Management and other episodes that destabilized markets and said they show the threat to investors “when excessive leverage is combined with careless risk taking,” according to the letter.

While Brown didn’t ask the firms to testify, his effort may signal that lawmakers could hold hearings on the matter.

“I am troubled, but not surprised, by the news reports that Archegos entered into risky derivatives transactions facilitated by major investment banks, resulting in panicked selling of stocks worth tens of billions of dollars and those banks collectively losing nearly $10 billion,” Brown wrote.

Brown said he wanted details on regulatory requirements for family offices, how they are evaluated as prospective clients and what collateral is maintained.

The senator also asked for supervisor or risk committee approvals for Archegos as well as any “consideration of the 2012 agreement to criminal wire fraud by Tiger Asia Management LLC, Mr. Hwang’s prior firm.”



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