Credit Suisse margin calling?
Discussion
ReverendCounter said:
CS apparently margin calling their buy-side customers - given the state of the global financial markets, can they all cover?
If one or more can't, will we see a squeeze on certain shorted stocks? (...and not any old squeeze...)
Well, it might be "the markets", but you have the annual "windowdressing" exercise going on (for capital, bank levy and a dozen other ratio's) on the 31st Dec. Plus ECB stress tests on the 30th Dec - it's a huge drain on collateral. Repo rates are suggested to go negative over the turn - so ALL collateral is squeezed.If one or more can't, will we see a squeeze on certain shorted stocks? (...and not any old squeeze...)
Then you also have the expected TLTROs due to payback - whether they will or not - is still a guess. It will be the cost of making margin calls that will be the issue, I suspect.
Oh, and not forgetting the big CBs all having meetings (Fed on Wed - with slightly hotter than expected inflation, ECB, BoE, SNB and Norway going on Thursday). Could be interesting this week.
Edited by jamiedimonBTClover on Monday 12th December 16:24
LeoSayer said:
Sorry if I'm being thick but don't margin calls happen all the time?
What contracts are you talking about? What are the underlyings?
Of course, but the cost of covering those Margin Calls - is going to be expensive as balance sheet and high-grade collateral is getting drained from the market. If you need Bunds today, you might be borrowing them (Vs Euro's say) @ 1.6%; over YE that could be -2.5%.What contracts are you talking about? What are the underlyings?
And if you can't cover a margin call......
Everything is going into regulatory proof, so liquidity dries up.
jamiedimonBTClover said:
Well, it might be "the markets", but you have the annual "windowdressing" exercise going on (for capital, bank levy and a dozen other ratio's) on the 31st Dec. Plus ECB stress tests on the 30th Dec - it's a huge drain on collateral. Repo rates are suggested to go negative over the turn - so ALL collateral is squeezed.
Then you also have the expected TLTROs due to payback - whether they will or not - is still a guess. It will be the cost of making margin calls that will be the issue, I suspect.
Oh, and not forgetting the big CBs all having meetings (Fed on Wed - with slightly hotter than expected inflation, ECB, BoE, SNB and Norway going on Thursday). Could be interesting this week.
Thank you for the specifics, an extremely complicated set of variables affecting each other which I wasn't aware of, but one comment that I saw was:Then you also have the expected TLTROs due to payback - whether they will or not - is still a guess. It will be the cost of making margin calls that will be the issue, I suspect.
Oh, and not forgetting the big CBs all having meetings (Fed on Wed - with slightly hotter than expected inflation, ECB, BoE, SNB and Norway going on Thursday). Could be interesting this week.
"the bank are also having to discuss margin calls on existing loans due to asset values falling broadly across the market, the people said.
Private banking staff said the push is being driven not by incentives but by fear of getting fired" < although that sort of pressure might be the norm in this sector?
ReverendCounter said:
Thank you for the specifics, an extremely complicated set of variables affecting each other which I wasn't aware of, but one comment that I saw was:
"the bank are also having to discuss margin calls on existing loans due to asset values falling broadly across the market, the people said.
Private banking staff said the push is being driven not by incentives but by fear of getting fired" < although that sort of pressure might be the norm in this sector?
CS position is extremely, read extremely again capital sensitive right now. They can't afford to eat a margin non-payment. They extend leverage and have had knocks with Archegos so its prep work. Historically there is anecdotal evidence they have screwed this up with normal clients. Given the market has been attacking them (a bit like Deutsche), it's not a surprise they want a smooth Year End. It's difficult to see they are a massive risk, despite what their CDS says. Its more like market bullying (IMHO), although that did Lehaman..."the bank are also having to discuss margin calls on existing loans due to asset values falling broadly across the market, the people said.
Private banking staff said the push is being driven not by incentives but by fear of getting fired" < although that sort of pressure might be the norm in this sector?
YE is always tricky for Banks and Prime Brokers in particular, get it wrong; and it's not curtains but f
king expensive. This YE presenting similar but different challenges. Because of the noise around CS, a lot of their liabilities have been skittish. Getting YE wrong costs millions, it's not what you need when you are raising capital.
jamiedimonBTClover said:
... They can't afford to eat a margin non-payment.
Sounds very precariousjamiedimonBTClover said:
... Given the market has been attacking them (a bit like Deutsche),
I read elsewhere that Deutsche + Barclays were next after CS - do you think there's truth in this, or do you think that might also be market bullying rather than a reflection on their actual current state?jamiedimonBTClover said:
Because of the noise around CS, a lot of their liabilities have been skittish
Sounds like a nightmare, desperately seeking stability while markets are shaking the walls. Seems like a critical point is approaching where the sector is about to turn, or is now turning on the weakest in the herd.Gassing Station | Finance | Top of Page | What's New | My Stuff