Archegos Collapse Hits Japan’s Largest Bank
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More losses from the downfall of Bill Hwang’s Archegos Capital Management have been unveiled, this time from Japan’s largest bank. Mitsubishi UFJ Group’s (MUFG) securities arm faces losses of up to $300 million related to an unnamed U.S. client, according to a statement, through its European subsidiary.
Losses could change depending on market prices and the unwinding of the transactions, though it isn’t expected to have a material impact on MUFG’s business capability or financial soundness.
MUFG is taking all necessary steps to manage the risk and any effect on earnings will be reflected in the fiscal year starting April 1.
The statement is widely believed to refer to the collapse of Bill Hwang’s family office Archegos and the latest hit to MUFG brings total global bank losses to as high as $6.3 billion.
Nomura recently warned of around $2 billion in losses reportedly also believed to be linked to Archegos. Credit Suisse was also significantly impacted with estimated losses of $1 billion to $4 billion.
Other banks involved, such as Goldman Sachs, Morgan Stanley and Deutsche Bank, have claimed to see little to no impact. Wells Fargo was the latest to unveil its prime brokerage relationship with Archego but said it did not experience any related losses as the bank was well collateralized at the time and no longer has any exposure.
Questions & Answers
Q.Which part of Mitsubishi UFJ Group has incurred these losses?
Which part of Mitsubishi UFJ Group has incurred these losses?
The losses relate to MUFG's securities arm, specifically through its European subsidiary. They stem from transactions with an unnamed US client, widely believed to be Archegos Capital Management.
Q.What is the total estimated loss for global banks due to the Archegos collapse?
What is the total estimated loss for global banks due to the Archegos collapse?
The total estimated losses for global banks due to the Archegos collapse could be as high as $6.3 billion. This includes the recently unveiled losses from MUFG and previous impacts on other major banks.
Q.When will the financial impact of these losses be reported by MUFG?
When will the financial impact of these losses be reported by MUFG?
Any effect on MUFG's earnings from these losses will be reflected in the fiscal year beginning on April 1. The bank is taking steps to manage the risk effectively.
Q.Which other major banks have claimed to avoid significant losses from Archegos?
Which other major banks have claimed to avoid significant losses from Archegos?
Goldman Sachs, Morgan Stanley, and Deutsche Bank have reported little to no impact from the Archegos collapse. Wells Fargo also stated it had no related losses, being well collateralized at the time.
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