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Fed and Bank of England Step Up Scrutiny of Banks' Exposure to Large Trading Firms
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According to the Financial Times, the Bank of England and the Federal Reserve have intensified their review of banks' exposures to large trading firms and market makers, following turmoil at the AI-focused hedge fund Situational Awareness that caused significant losses at Jane Street. Regulators are asking global banks about their exposures to firms including Jane Street and Ken Griffin's Citadel Securities. While understanding bank exposures to non-bank financial intermediaries was already a long-term priority, sources say the recent sell-off and Jane Street's losses have accelerated these efforts. Authorities are seeking information on these firms' risk appetites, how bank exposures change intraday, and the functioning of risk controls.
Source report
September 21 — The Bank of England and the U.S. Federal Reserve have stepped up their review of banks' exposure to large trading firms, following a period of turbulence at the AI-focused hedge fund Situational Awareness that resulted in significant losses for Jane Street, according to the Financial Times.
Sources familiar with the matter said regulators are now asking global banks about their exposure to trading companies and market makers, including New York-based Jane Street and Ken Griffin's Citadel Securities.
While understanding banks' exposure to so-called non-bank financial intermediaries had already been listed as a longer-term priority by the regulators, sources indicated that the recent sell-off and Jane Street's losses have accelerated these efforts. Regulators are now seeking more detailed information on positions linked to trading firms and market makers.
Specifically, authorities are requesting data on:
- The risk appetite of these trading firms
- How banks' intraday exposure to them changes
- How risk controls are functioning
Source
格隆汇Western
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Fed and BOE intensify bank exposure scrutiny after Jane Street’s $15B loss