Fallout from Switzerland's wildly swinging currency ricocheted
around the world, hitting global banks with tens of millions of
dollars in losses and triggering the collapse of some brokerage
firms.
Deutsche Bank suffered about $150 million in losses Thursday
after the Swiss National Bank abruptly removed the cap on the Swiss
franc's value, sparking a massive franc rally, said a person
familiar with the matter. Barclays also racked up tens of millions
of dollars in losses, although they totaled less than $100 million,
another person said.
Shares in FXCM, the biggest retail foreign-exchange broker in
the U.S. and Asia, didn't open Friday for trading on the New York
Stock Exchange pending news. FXCM said the unprecedented volatility
in the euro against the Swiss franc triggered losses that left it
with a negative equity balance.
A U.K. retail broker entered insolvency, and a New Zealand
foreign-exchange trading house collapsed. Regulators in Europe and
Asia scrambled to assess the damage, seeking information from banks
and brokerages and trying to ascertain the potential impact on
mom-and-pop investors. People in some cities lined up to change
currencies (see picture above, in Geneva).
The losses were triggered by the Swiss franc's 30% jump against
the euro in the minutes after the SNB scrapped its cap on the
nation's currency relative to the euro. Brokers found themselves
unable to trade because of the unexpected volatility and the fact
that some big banks stopped quoting rates for francs. Their
customers' huge losses, partly exacerbated by high degrees of
leverage, quickly eroded the brokerages' financial cushions,
tipping some into insolvency.
Wall Street Journal staff
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