: Yellen renews focus on hedge funds as Archegos failure raises financial stability concerns


Treasury Secretary Janet Yellen met with more than a dozen of the nation’s top financial regulators on Wednesday to discuss risks to the U.S. financial system that resulted from last March’s coronavirus-related market crash and to address potential vulnerabilities related recent volatility triggered by the blow up of the hedge fund Archegos Capital Management, according to a readout of the meeting.

The meeting of the Financial Stability Oversight Council, a body created by the Dodd-Frank Financial Reform Act in the wake of the 2008 financial crisis, was Yellen’s first as head of the Treasury Department and featured a presentation on “hedge-fund activities during the market stresses in March 2020, including the relationship between hedge funds’ deleveraging and price declines in certain financial markets,” the readout said.

Read more: Archegos meltdown, GameStop drama underscore need for more hedge-fund disclosure, reformers say

Yellen asked the council to reconvene its Hedge Fund Working Group, which last reported to the council in 2016, and members of the council also discussed “recent market developments related to hedge-fund activities.”

Financial markets are still coming to terms with the impact of the failure of hedge fund Archegos Capital Management, which triggered the liquidation of more than $30 million in assets, as the funds’ brokers, which included some of the globe’s largest financial institutions, sought to limit their own exposure, the Wall Street Journal reported.

According to an analysis by JPMorgan

cited by Bloomberg, banks could see aggregate losses of between $5 billion and $10 billion, with Credit Suisse AG

and Nomura Holdings Inc.

bearing the brunt of the losses. Goldman Sachs

and Morgan Stanley

also reportedly suffered losses as a result of the episode.

Financial stocks were the second worst performing sector in the S&P 500 index on Tuesday, declining 0.9%, compared with a 0.4% overall gain for the S&P 500 SPX. U.S.-listed shares of Nomura have fallen 19.3% this week, and Credit Suisse shares have declined 17.6% over the same period, according to FactSet.

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