As published on finews.asia, Thursday 2 September, 2021.
Hong Kong’s central bank and top financial regulator are reportedly developing a system to prevent meltdowns from highly concentrated equity exposure, akin to the collapse of Bill Hwang’s family office Archegos.
The Hong Kong Monetary Authority and the Securities Futures and Commission’s project involves centralized databases to identify excessive risk-taking by banks and funds trading derivatives on the Hong Kong market, according to a Financial Times report citing unnamed sources.
Such risks would then be flagged to regulators who would alert financial institutions to mitigate any major collapse.
This could "solve" the Archegos problem, according to one source.
Domestic developments aside, the project has also attracted the attention of U.S. regulators, the report added.
Earlier this year, Wall Street experience one of the most spectacular collapses from up to $50 billion of highly leveraged bets from Archegos on a few U.S. and Chinese companies which resulted in major losses at Credit Suisse, Nomura, Morgan Stanley and more.