NEWSBYTE The tensions in the US financial services market have been revealed this week.
The measure of potential daily trading losses of four of the top five Wall Street banks over the past three months rose to its highest level since just after the 2008-09 financial crisis, according to a Financial Times report.
The Value at Risk (VaR) measure reveals the volatility of the financial environment since the coronavirus pandemic hit Western economies, with elevated risk levels forcing banks to access more capital and look at reducing the number of riskier assets in their portfolios.
According to the FT, JPMorgan’s daily VaR measure hit its highest level since the fourth quarter of 2009; Goldman Sachs recorded its highest since Q4 2010, while Citi and Bank of America both recorded their highest VaRs since Q3 2011.
The exception among the big five was Morgan Stanley, which measured its highest VaR since 2018, and significantly less than the totals recorded in the years immediately after the financial crisis, during which it dramatically reduced its trading business.
Meanwhile, Robert F Smith, Head of Technology Investment behemoth Vista Equity Partners, has warned that the next round of financial stimulus to help firms recover from the crisis must target those small businesses that have been least well served by the banking sector to date.
Appearing on NBC, he said, “We need to continue to rally as Americans to come with real, lasting, scalable solutions to enable the communities that are getting hit first, hardest, and probably will take the longest to recover with solutions that will help these communities thrive again.”
Smith called for an injection of cash into community development and new financial technology (FinTech) tools to help remedy the crisis.