Mizuho is investigating whether it suffered any significant losses in the Archegos Capital collapse, as it emerged that the Japanese bank had a close client relationship with the US-based family office, according to people at current of the situation.
Mizuho’s internal probe followed warnings This week from Nomura and Mitsubishi UFJ Financial Group that Japanese lenders suffered losses of $ 2 billion and $ 270 million respectively from exposure to an anonymous client.
In both cases, people familiar with the situation confirmed that the client was Archegos, a fund managed by a former hedge fund manager. Bill hwang, which was forced by default by a huge margin call last week.
Although Mizuho does not offer a full range of top-notch brokerage services, people familiar with the situation have said that the Japanese bank has provided substantial equivalent facilities to Archegos and its potential losses could be similar to those of MUFG. .
A group of banks, hungry for Archegos’ high commissions, provided the family office with more than $ 50 billion in combined leverage in volatile stocks via swap contracts and other funding, said people with first-hand knowledge of the situation.
The managers of two of Archegos’ main brokers are investigate whether Hwang deliberately misled them about the extent of the replicated positions he had built with the leverage provided by rival banks, according to people familiar with the probes. Archegos could not be reached immediately for comment.
Mizuho has said he has no plans to revise his earnings estimates, but will do so if necessary. The bank declined to comment on its internal investigation into its exposure to Archegos or relationships with individual clients.
The fallout from Archegos, whose missed margin call last week sparked a chaotic fire sale of Shares of ViacomCBS and a disorderly rush to exit heavily leveraged positions on Friday affected a circle of nine global banks with varying levels of exposure.
Along with Goldman Sachs, Morgan Stanley and UBS, which have indicated that their losses should be minimal, the group includes Credit Suisse, whose potential losses are estimated at around $ 4 billion, according to people close to the Swiss investment bank.
According to bankers directly involved, discussions took place last Thursday between Archegos and six banks that provided the fund with prime brokerage services.
the discussions focused on whether the conduct of Archegos could be managed in an orderly fashion, but these efforts were thwarted when some banks started selling Archegos-related shares.
Mizuho, Deutsche Bank and MUFG were not involved in the talks, according to people familiar with the situation, as their exposure was deemed lower than that of other banks.