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Cypriot investment firms lost 42.5 mln euros after the Swiss National Bank decision to remove its cap on the Swiss franc’s exchange rate with the euro, causing a surge in the Swiss currency. Demetra Kaloyirou, Chairman of the Cyprus Securities and Exchange Commission that regulates more than 180 investment firms and fund managers, said that 24 companies had lost an accumulated 42.5 mln euros from their client trading accounts.
She added that of the vast majority, investment firms, have not been affected.
“The remaining CIFs said that they experienced some losses, which either do not affect their capital adequacy or are insignificant,” she said. “The affected investment firms maintain equity and capital adequacy ratio above the minimum
approved limit, set by the law, which is 9%”, Kaloyirou noted.
Meanwhile, Denmark’s retail forex broker Saxo Bank, that also has a Cyprus presence, reports that due mainly to negative client balances on which it may not be able to collect, the bank may be forced to take a loss of up to DKK 700 mln, or about $107 mln. However, even if no collections take place and it takes the maximum possible loss, it will remain capitalised well in excess of regulatory requirements.
Saxo Bank CFO/CRO Steen Blaafalk was quoted by LeapRate as saying that the reduction of leverage on Swiss Franc CHF pair trades was lowered well in advance of the SNB’s removal of the CHFEUR 1.20 floor. A smart move, it seems, as the $107 mln figure could indeed have been a lot worse, if clients had used more leverage in their CHF positions, LeapRate added. Meanwhile, the SNB decision is unlikely to inflict major damage on French regional and local governments (RLGs), or on banks exposed to the RLG sector, according to Moody’s. “French RLGs’ overall exposure to CHF/EUR-indexed loans is concentrated on a limited number of entities, and has been receding in the last few years,” said Daniel Marty, associate analyst at Moody’s. The rating agency noted that French RLGs have already negotiated with banks to progressively exit their EUR/CHF indexed loan contracts, and have had support from a EUR 1.5 bln state support fund set up in 2014 which has helped local governments cover the cost of converting their structured loans into conventional debt.
Information collected by Moody’s from lenders points to about EUR 3 bln of exposure for less than 500 entities.