The US Central Bank (Fed) on Thursday called for
"more transparency"
investment funds and other non-bank financial entities but which can generate significant losses for the entire system, as recent episodes have shown GameStop and Archegos.
Read also: The fiasco of Archegos shakes up finance
"Some recent episodes have highlighted the opacity of risky exposures and the need for greater transparency of speculative funds (hedge funds) and other financial entities with leverage effects which can transmit tensions to the financial system"
, underlines the Fed in its semi-annual financial stability report.
The GameStop saga, named after this chain of video game stores which saw its share rise exponentially and then fall, but also the rout of the Archegos investment fund, which cost global banks more than $ 10 billion, have agitated the markets in recent months.
Archegos fund debacle
The Archegos episode, in particular,
"highlights the potential of non-bank financial institutions (...) to generate significant losses in the financial system,"
commented Fed Governor Lael Brainard, a staunch advocate for the regulation of the financial sector. She thus underlines
"the importance of more consistent and more frequent disclosures"
of their data from these establishments. The debacle of the New York fund Archegos, which had been unable to reinject money to cover positions in derivatives, triggering a massive sell-off of shares on Wall Street, caused abysmal losses to from several banks including Credit Suisse and Nomura. These investment funds operate in a gray area for American financial regulators, insofar as they do not manage the savings of the general public and have therefore obtained exemptions from certain regulations imposed after the 2007-2008 crisis.
