Credit Suisse is triggering margin calls on clients that use Russian resources as collateral.
With Russian assets falling in value, it’s causing a domino effect that’s going to affect all global ties to Russia.
Margin calls are going to affect banks and financial institutions to close and liquidate their positions.
Welcome to Franknez.com – margin calls are on the horizon. And it’s going to tank the stock market even lower.
Let’s dive right into it!
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Wealthy individuals face frozen accounts
The invasion of Ukraine has left wealthy individuals invested in Russian assets with frozen accounts and demands for more collateral.
In a margin call, banks ask investors to add cash or securities to a portfolio that typically includes borrowed funds when the market value drops below margin requirement.
The bank can forcibly liquidate clients’ holdings if they are unable to deposit the funds.
Credit Suisse told PBI that its position in the matter remains unchanged.
“Credit Suisse serves its clients while complying with all applicable laws and regulations, including any sanctions from relevant authorities,” the firm said.
This isn’t affecting just Europeans; Credit Suisse is imposing margin calls in the U.S. too.
How is this affecting investors in the U.S.?
Getting rid of Russian assets is a big problem for hedge fund managers in the U.S.
Russia’s central bank retaliated by banning Russian brokers from selling securities held by foreigners.
Furthermore, Russian Prime Minister Mikhail Mishustin said the country will temporarily stop foreign investors from selling Russian assets.
Hedge funds in the U.S. holding Russian assets are in a big mess right now.
Margin call tension is causing liquidation in many areas of the market.
U.S. hedge funds will be forced to liquidate positions or hedge their plays, further overleveraging short positions.
Financial institutions in the U.S. exposed to Russia
Citigroup disclosed in its annual report that it has nearly $10 billion in exposures to Russian counterparties, including loans, reverse repo agreements and cash deposits.
Citigroup stock is down more than 11% year-to-date.
Morgan Stanley’s next gen emerging markets fund (MFMIX) has also been exposed to Russia.
Nearly $16.6 million is frozen due to Russian sanctions.
That’s 13.6% of the total net assets of $122 million in the fund.
Schwab’s fundamental emerging markets large company index ETF (FNDE) has also been affected.
Out of the $4.8 billion in assets, 12.7% have been exposed to the Russian stock market.
Credit Suisse aids U.S. probe of rivals Morgan Stanley and Goldman Sachs
Credit Suisse is trying to help the U.S. Department of Justice build a case to block trading against rivals Morgan Stanley and Goldman Sachs, REUTERS.
The bank delivered a presentation to the U.S attorney’s Office in New York flagging issues leading to the collapse of Archegos Capital.
Archegos Capital was a private family office, also known as unregulated hedge funds, that caused banks to lose billions of dollars.
Banks and hedge funds are currently under investigation by the Justice Department for illegal trading activities.
Two of these banks under investigation are Morgan Stanley and Goldman Sachs.
One hedge fund has been raided by the FBI for flooding the market with fake orders to drive the price of stocks down.
It comes as no surprise Credit Suisse is imposing margin calls on investors but also attacking its rivals.
What does this mean for shareholders?
Leave your thoughts in the comment section below.