Major global banks could be hit with billions of dollars in losses after US investment firm Archegos Capital was forced to dump shares last week when it got into financial trouble.
Nomura (NMR) and Credit Suisse (CS) said Monday that earnings might take “significant” hits after a client of their broking services defaulted on margin calls last week, roiling Wall Street. Shares in both banks plunged on Monday, wiping billions of dollars off their market capitalization. A margin call by a broker requires a client to add funds to its account if the value drops below an agreed level.
If it can’t, the broker can dump the client’s shares and liquidate its holdings to make up the shortfall.
Neither bank identified the client that defaulted on the margin calls. But a person familiar with the matter stated that New York-based Archegos was the firm causing losses for Credit Suisse. A spokesperson for the Swiss bank declined to comment.
