Hedge Fund Leverage Probe Is Trans-Atlantic

Jan 9 2007 | 10:58am ET

Hoping to head off another Long Term Capital Management, regulators from the U.S. and Europe are together investigating loans to hedge funds, potentially presaging a move to increase margins.

The Securities and Exchange Commission, New York Federal Reserve Bank and the U.K.’s Financial Services Authority, along with German and Swiss regulators, met with 10 banks that are among the largest lenders to hedge funds last month.  In an interview with Bloomberg News, SEC Commissioner Annette Nazareth called the meeting “a fact-finding effort,” and said that no decision on whether new rules are needed has been made. But one thing is clear: Any move could put a dent in the $8 billion in prime brokerage fees investment banks reap each year.

Regulators fear that a battle for business in the lucrative prime brokerage market may be inflating leverage to dangerous levels. They hope to learn how much margin banks require in loans to hedge funds.

According to Bloomberg, Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley and UBS participated in last month’s gathering.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.