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☆ EU readies next steps to boost its capital market
▼ + stars: | 2022-11-17 | by ( Huw Jones | ) www.reuters.com time to read: +2 min

Mairead McGuinness said there had been good progress in building the EU's capital markets union (CMU) but more needed to be done to ease reliance on banks for funding companies and the economy, and on London post-Brexit for clearing euro denominated swaps. "We are still over-reliant on central counterparties outside the European Union and this is also a matter of financial stability," McGuinness told an event held by the Association for Financial Markets in Europe (AFME). "In the unlikely case of something going wrong, we would not be in the driving seat for decisions, so we want to increase the attractiveness of clearing in the EU," she said. The EU is watching closely steps being taken by Britain to bolster the competitiveness of its financial sector, now largely cut off from the bloc. "We realise that for the size of our economy the capital markets don't reflect that, as we rely very heavily on bank finance and that is not appropriate."

It's a stark reversal for five-year-old Multicoin, which announced a $430 million fund in July, its third and largest to date. "We put entirely too much trust in our relationship with FTX," Multicoin managing partners Kyle Samani and Tushar Jain wrote in the 3,400-plus word letter, which CNBC obtained. Multicoin said it doesn't expect the crypto market to turn anytime soon. "Many trading firms will be wiped out and shut down, which will put pressure on liquidity and volume throughout the crypto ecosystem. The crypto market has experienced multiple pullbacks in the last few years and has bounced back.

Nov 16 (Reuters) - Crypto lender Genesis Global Capital suspended redemptions on Wednesday citing the failure of crypto exchange FTX, while court papers showed FTX founder Sam Bankman-Fried faces legal action, as its sudden collapse ripples across the industry. LEGAL ACTIONMeanwhile, U.S. court filings showed Bankman-Fried is facing legal action in the United States from investors alleging the company's yield-bearing crypto accounts violated Florida law. Bloomberg on Tuesday also reported that U.S. and Bahamian authorities were discussing the possibility of bringing Bankman-Fried to the United States for questioning. Elsewhere, crypto exchange Binance, in a response to a hearing on the crypto industry by a British parliamentary committee on Monday, said it had not contributed to FTX's collapse. The U.S. House Financial Services Committee said Wednesday it plans to hold a hearing in December to investigate the collapse of cryptocurrency exchange FTX.

Nov 16 (Reuters) - Crypto broker Genesis Global Capital is suspending redemptions and new loan originations at its lending business, it said on Wednesday, in the latest sign of the industry fallout from last week's collapse of major crypto exchange FTX. "We have taken the difficult decision to temporarily suspend redemptions and new loan originations in the lending business. We are working diligently to shore up the necessary liquidity to meet our lending client obligations," a Genesis spokesperson said in a statement. U.S. court filings showed Sam Bankman-Fried, FTX's founder, is being sued in a U.S. class action by investors alleging the company's yield-bearing crypto accounts violated Florida law. The proposed class action filed late on Tuesday in Miami alleges that FTX yield-bearing accounts were unregistered securities that were unlawfully sold in the United States.

REUTERS/Maja Smiejkowska/File PhotoCommodity trade finance covers many types of loans, typically from banks, that facilitate global movement of goods from wheat to gasoline. Most trade finance loans are short-term, less than a year. Traders’ credit lines became strained last year when natural gas prices sky-rocketed in the fourth quarter. ‘DESIRE TO DIVERSIFY’Lending for commodity trade finance has become more diverse, with non-bank financial institutions (NBFI) stepping in. The underlying issue was the retreat of major banks from commodity financing after some 2020 defaults in the sector while Russian banks Sberbank and Gazprombank that were set to expand have now been shut out of Europe.

☆ FTX says it could have over 1 million creditors
▼ + stars: | 2022-11-15 | by ( Ryan Browne | ) www.nbcnews.com time to read: +4 min

Beleaguered cryptocurrency exchange FTX may have more than 1 million creditors, according to a new bankruptcy filing, hinting at the huge impact of its collapse on crypto traders. Last week, when it filed for Chapter 11 bankruptcy protection, FTX indicated that it had more than 100,000 creditors with claims in the case. But in an updated filing Tuesday, lawyers for the company said: “In fact, there could be more than one million creditors in these Chapter 11 Cases.”Typically in such cases, debtors are required to provide a list of the names and addresses of the top 20 unsecured creditors, the lawyers said. Over the past 72 hours, FTX has been in contact with “dozens” of regulators in the U.S. and overseas, the company’s lawyers wrote. Over the weekend, FTX was hit with an apparent cyberattack resulting in the theft of more than $400 million worth of tokens.

Commodity trade finance covers many types of loans, typically from banks, that facilitate global movement of goods from wheat to gasoline. Most trade finance loans are short-term, less than a year. The involvement of hedge funds in commodity trade finance has created a lifeline for smaller firms, deemed to be higher risk for banks due to strict capital requirements and clean energy goals. 'DESIRE TO DIVERSIFY'Lending for commodity trade finance has become more diverse, with non-bank financial institutions (NBFI) stepping in. The Swiss firm specialises in financing small to mid-sized commodity merchants and has achieved returns between 6% to 10% over the last 10 years.

According to the source, FTX did not have nearly enough on hand. Its biggest customer, according to a source, was the hedge fund Alameda. In general, mixing customer funds with counterparties and trading them without explicit consent, according to U.S. securities law, is illegal. Sam Bankman-Fried declined to comment on allegations of misappropriating customer funds, but did say its recent bankruptcy filing was a result of issues with a leveraged trading position. The blurred lines between FTX and Alameda Research resulted in a massive liquidity crisis for both companies.

Jordan Vonderhaar | Bloomberg | Getty Imageswatch nowSaylor was speaking on CNBC's "Squawk on the Street" as FTX's demise roiled the crypto market. Bitcoin tumbled 19% in December, as investors rotated into assets deemed safer in a tumultuous economy. David Marcus, former head of crypto at Facebook parent Meta , used a phrase that would soon enter the lexicon. "It's during crypto winters that the best entrepreneurs build the better companies," Marcus wrote in a Jan. 24 tweet. Ryan Gilbert, founder of fintech venture firm Launchpad Capital, said the crypto world is facing a crisis of confidence after the FTX implosion.

☆ Crypto markets in turmoil over FTX bankruptcy
▼ + stars: | 2022-11-11 | by ( ) www.reuters.com time to read: +9 min

Nov 11 (Reuters) - Crypto exchange FTX filed for U.S. bankruptcy on Friday and Sam Bankman-Fried stepped down as CEO, after a liquidity crisis that has prompted intervention from regulators around the world. FTX, its affiliated crypto trading fund Alameda Research and about 130 other companies have commenced voluntary Chapter 11 bankruptcy proceedings in Delaware, FTX said. MARKET REACTION:Shares of cryptocurrency and blockchain-related firms dropped on Friday after FTX, one of the biggest crypto exchanges, said it would initiate bankruptcy proceedings in the United States, triggering a potentially massive meltdown in the industry. "The shock was that this guy was the face of the crypto industry and it turned out that the emperor had no clothes. Ultimately, the lesson here is that the crypto industry needs to stop trusting cults of personality, no matter how well-intentioned they might seem."

But there was also a wider question for the officials: could the energy companies' use of such complex instruments threaten financial stability? So the ECB has widened its scrutiny to examine potential domino effects, including on the banks which it supervises. read moreWhile ECB President Christine Lagarde said the ECB stood ready to provide liquidity to banks, she said it would not do the same for energy firms. "Energy companies pose specific risks not only to financial stability. Reuters GraphicsRating agency Moody's, meanwhile, said that energy companies did not provide enough information about their derivatives.

For the second time in less than three years, the Bank of England has made an emergency intervention in the market for UK government bonds. Investors rushed to liquidate assets, including money market funds which held UK government bonds. The latest intervention was triggered by excessive leverage in UK pension funds, which had borrowed to boost returns using a strategy known as liability-driven investing (LDI). To prevent future blow-ups, regulators could cap money market funds’ exposure to less liquid assets, reducing the risk of a run by investors. Financial market regulators in European fund centres like Ireland and Luxembourg have stepped up surveillance of LDI strategies used by UK pension funds, the Financial Times reported on Oct. 28.

☆ Bank of England wants more transparency for 'non banks' after gilts turmoil
▼ + stars: | 2022-11-07 | by ( Huw Jones | ) www.reuters.com time to read: +4 min

[1/3] Traders work on the trading floor of Barclays Bank at Canary Wharf in London, Britain December 7, 2018. It shone a light on the less regulated global $200 trillion 'non-bank' sector which is made up of pension funds, insurers and different types of investment funds, and spans borders. The onus for building resilience in the non-bank system sits first and foremost with the firms themselves," Breeden added. Banks and non-banks also need to improve stress-testing for risks, she added. Toks Oyebode, executive director for regulatory affairs at JPMorgan bank, said steps outlined by Breeden and other regulators, such as regarding margining, were timely.

☆ More transparency needed for 'non banks' after gilts turmoil, says Bank of England
▼ + stars: | 2022-11-07 | by ( Huw Jones | ) www.reuters.com time to read: +3 min

It shone a light on the sprawling and less regulated 'non-bank' financial sector which is made up of pension funds, insurers and different types of investment funds, and spans borders. The onus for building resilience in the non-bank system sits first and foremost with the firms themselves," Breeden added. "Beyond improving transparency, regulators will need to consider how best to ensure leverage is well managed. Banks and non-banks also need to improve stress-testing for risks, she added. Reporting by Huw Jones Editing by Gareth Jones and Toby ChopraOur Standards: The Thomson Reuters Trust Principles.

☆ Euronext Italian arm to become group-wide clearer from end 2023
▼ + stars: | 2022-11-03 | by ( Huw Jones | ) www.reuters.com time to read: +2 min

LONDON, Nov 3 (Reuters) - Pan-European stock exchange Euronext (ENX.PA) said on Thursday that customers will be able to clear all share trades at its Italian arm from the end of 2023, a move that ends reliance on a London Stock Exchange Group (LSEG) unit in Paris. "This is the first milestone in the transformation of Euronext Clearing to create the Euronext clearing house of choice for its cash equity markets," Euronext said in a third quarter trading statement. Clearing in Euronext credit derivatives will follow in 2024. As many are likely to shift stock and derivatives trading to Italy given efficiencies from using one location. Earlier this week, Deutsche Boerse's Eurex Clearing offered payments to buy-side customers who relocate derivatives clearing from London in 2023 in anticipation of the EU legislation.

☆ Ukrainian gas company Naftogaz first-half loss widens to $1.6 bln
▼ + stars: | 2022-11-03 | by ( ) www.reuters.com time to read: +2 min

Nov 3 (Reuters) - Naftogaz, Ukraine's state-owned gas company, on Thursday reported a bigger loss in the first half of the year due to the impact of the war in the country following Russia's invasion in February. Naftogaz's net loss widened to 57.16 billion hryvnias ($1.57 billion) from 1.65 billion hryvnias a year before, with most of the losses recorded in the first quarter, it said. The destruction of its assets due to military shelling by Russia also affected its first-quarter loss, it said. Naftogaz, which has defaulted on some of its bonds, in August secured the backing of bondholders for a partial restructuring. The company said on Tuesday the government accepted Vitrenko's resignation effective Nov. 3, without giving further details.

☆ More liquidity support for energy utilities under looser EU state aid rules
▼ + stars: | 2022-10-28 | by ( Foo Yun Chee | ) www.reuters.com time to read: +2 min

BRUSSELS, Oct 28 (Reuters) - Energy companies, hit by soaring power and gas prices related to the war in Ukraine, can secure public guarantees exceeding 90% coverage from EU governments to cover margin call requirements under looser state aid rules, the European Commission said on Friday. Energy suppliers across Europe have struggled with a liquidity problem in the face of record-high wholesale power and gas prices following Russia's invasion of Ukraine, prompting governments to step in to help. Companies can get up to 2 million euros ($1.99 million) in state aid, a fourfold increase, the EU executive said. The cap for state support to businesses in the agriculture sector was lifted to 250,000 euros from 62,000 and for the fisheries and aquaculture sectors to 300,000 euros from 75,000 euros. Energy-intensive companies can also get more state aid while those receiving larger amounts will have to take measures to ensure they use cleaner energy.

The world's largest financial oil deal, the program known as the "Hacienda hedge" is designed to protect the oil revenues of Latin America's second-largest economy against price crashes on the world market. It classified previously public details, including the overall cost, the strike price for the put options and the amount set aside from the oil revenues stabilization fund that contributes to the overall protection. Mexico also no longer discloses the names of counterparties, which have long been big Wall Street banks and oil majors. Due to sensitivities around the hedge, Yorio declined to give details about the strike price of the options. "In the current context of geopolitical tension, oil price volatility is very high and therefore the volatility of the premiums associated with the hedge is very high."

☆ Global markets like 'whack-a-mole', volatility, liquidity are issues - bank execs
▼ + stars: | 2022-10-14 | by ( ) www.reuters.com time to read: +2 min

NEW YORK, Oct 14 (Reuters) - Trying to navigate through global market stresses is like "whack-a-mole," Citigroup Inc (C.N) CEO Jane Fraser said on Friday, as she added the bank is constantly stress testing scenarios. Wall Street banking executives said they were keeping a close watch on markets, after the volatility in the U.K., with liquidity a particular focus. That shook broader markets with U.S. yields surging along with those on British government debt. Europe "is at the centre of the storm" with continued energy supply constraints impacting some clients, Fraser said. Fraser added that large global institutions like Citi had a role in supporting the market as it was in a strong capital position.

☆ Bank of England says stress test shows UK counterparties 'resilient'
▼ + stars: | 2022-10-13 | by ( ) www.reuters.com time to read: +1 min

LONDON, Oct 13 (Reuters) - The Bank of England said on Thursday that the central counterparties (CCPs) in Britain's financial system were "resilient" after publishing the conclusions of its first public stress test for ICE Clear Europe, LCH and LME Clear. "While the stress test was exploratory, with no pass-fail assessments, the results are evidence of the overall resilience of the UK CCPs," BoE Deputy Governor Jon Cunliffe said in a statement. Register now for FREE unlimited access to Reuters.com RegisterThe BoE said it checked whether the CCPs were resilient to a market stress scenario and to the simultaneous default of the two largest clearing member groups. The exercise started in October 2021 and was designed to be as severe as the worst historical market stress scenario experienced by each CCP up to that point. "We will engage these CCPs on our findings, which will help the Bank target its supervision and inform CCPs' approach to risk management," Cunliffe said.

But it is unclear how many lenders are tapping the facility and whether pension funds are willing to shell out additional fees for what is a temporary solution, sources told Reuters. Banks are reluctant to increase their lending to LDI funds through the repo facility, according to one official at a European bank. BRIDGING THE GAPLDI is an investment strategy sold by asset managers like BlackRock, Legal & General Investment Management and Insight Investment to pension schemes to help them match their assets and liabilities. Governor Andrew Bailey has rejected calls to continue buying bonds from pension funds which say they still need support beyond Friday. "It's a bridging tool that they can still use to keep the dialogue with the market and the pension funds going."

☆ Britain warns of tighter rules for crisis-hit LDI funds
▼ + stars: | 2022-10-12 | by ( Huw Jones | ) www.reuters.com time to read: +3 min

The FCA regulates asset managers who sell and run LDI strategies, while TPR regulates pension funds. The BoE oversees banks, some of which are part of the LDI chain. LDI is a popular product sold by asset managers to pension funds, using derivatives to help them match assets with liabilities so there is no risk of a shortfall in money to pay pensioners. Pension funds struggled to come up with higher collateral calls to back the derivatives used in the strategy, forcing the BoE to intervene in the gilts market. Given many LDI funds are listed in Dublin or Luxembourg, the European Union would also need to make reforms to implement such requirements.

While estimates of how much pension funds need to sell vary they are in the hundreds of billions of pounds, and it is not known how much funds have already raised in cash. Tuesday's BoE intervention was targeted at buying index-linked bonds, a far smaller market than gilts, dominated by pension funds and which suffered another significant selloff this week. He estimates pension funds could sell assets totalling around 300 billion pounds as they adjust hedging positions, although it is not clear how much they may have sold already. He estimated 100 billion pounds could come from gilts and the rest from assets such as global credit, global equities and asset-backed securities. "The bottom line is a lot of schemes need to rebalance their portfolios," he said.

☆ Treasury fines crypto company $29.3 million for violating multiple U.S. sanctions, Bank Secrecy Act
▼ + stars: | 2022-10-11 | by ( Chelsey Cox | ) www.cnbc.com time to read: +4 min

U.S. Treasury Secretary Janet Yellen holds a news conference in the Cash Room at the U.S. Treasury Department in Washington, U.S. July 28, 2022. The Treasury Department fined a Washington-based cryptocurrency trading platform $29.3 million for violating multiple sanctions, including those prohibiting U.S. companies from doing business with individuals operating in Iran, Sudan, Syria, Cuba and the Crimea region of Ukraine, the agency announced Tuesday. The Treasury's Financial Crimes Enforcement Network division, or FinCen, imposed a total civil penalty of $29.3 million, which covers additional violations under the Bank Secrecy Act. FinCEN also discovered that the company did not maintain an effective anti-money laundering program from February 2014 through December 2018. A sanctions compliance program was not adopted until December 2015, though Bittrex began offering virtual currency services in early 2014.

Compounding the pain, providers of so-called liability-driven investment strategies (LDI) are demanding more cash to support new and older hedging positions. The cash buffers now required are about three times bigger than previously requested, according to four consultants advising pension schemes, as market players seek bigger cushions against more volatile moves in bonds. Estimates of how much pension funds need to sell range but are in the hundreds of billions of pounds, although it is not known how much in assets schemes have sold already. "We are definitely not there," he said, referring to whether funds were close to raising the required cash by selling assets. He estimated 100 billion pounds could come from gilts and the rest from assets such as global credit, global equities and asset-backed securities.

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