Archegos Blowup May Spur Greater Bank Supervision, U.K. Regulator Says

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Archegos Blowup May Spur Greater Bank Supervision, U.K. Regulator Says
Credit: © Reuters.

(Bloomberg) -- The Bank of England’s top banking regulator said the $10 billion meltdown of Archegos Capital Management was “extraordinary” and may lead to supervisory fallout around the world.

Sam Woods, head of the BOE’s Prudential (NYSE: PUK ) Regulation Authority, told U.K. lawmakers on Wednesday that British regulators’ probe into the collapse would likely conclude within the next month.

“From that will flow various bits of supervisory action and there may be policy as well,” Woods said, adding that watchdogs globally are in “live discussion” about their response. “From the banking end, I think we do need to overhaul the ways these types of exposures are managed within the banking sector.”

The implosion of Archegos in March led to multibillion-dollar losses and a slew of senior departures from the banks that handled its business. The BOE, U.S. Securities and Exchange Commission and Basel Committee on Banking Supervision are among authorities considering action, including whether to force banks to reveal more about their risky trading positions.

Crypto Capital

Woods also said the BOE was supportive of the recent Basel Committee proposal to put the maximum risk weighting on banks’ holdings of Bitcoin . While he believes stablecoins tied to real assets could have a role in the broader economy, he took a dim view of the utility of cryptocurrency.

“I don’t think that will ever be suitable as a currency because of the likely enduring nature of the extreme volatility in its value -- I just don’t see how it’s going to be useful,” he said. Woods is watching the experiment with crypto in El Salvador, but is “deeply skeptical about that, certainly for the U.K.”

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© Bloomberg. Sam Woods, deputy governor for prudential regulation at the Bank of England (BOE) and chief executive officer of the Prudential Regulation Authority (PRA), speaks during a news conference following the publication of the Financial Stability Report at the central bank in the City of London, U.K., on Monday, Dec. 16, 2019. The BOE said it will lift the amount of high-quality capital banks are required to hold, even as it said the U.K.'s biggest lenders can weather a financial crisis.

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