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Bank Of England Puts ‘Threat To Stability’ By Hedge Funds Under Microscope

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http://www.independent.co.uk/news/business/news/bank-of-england-puts-threat-to-stability-by-hedge-funds-under-microscope-8839207.html

The Bank of England’s risk-watchers put hedgies in the spotlight today as potentially vulnerable to rising market interest rates.

The Financial Policy Committee, chaired by Governor Mark Carney, is to carry out more research with the Financial Conduct Authority into hedge funds to assess more fully whether they pose a threat to financial stability.

A statement following its latest meeting said: “The levels of leverage within, and therefore the vulnerability of, hedge funds needed to be looked at more closely.”

An industry source said the regulator’s twice-yearly survey of London’s 50 biggest hedge funds had not flagged up potential risks from leverage. “Leverage among hedge funds is generally lower than banks,” he said.

The FPC, which made no further recommendations this month, said the “moderate” rise in long-term interest rates seen in recent months as the US Federal Reserve readies itself to slow stimulus and the economy gradually recovers “did not pose immediate threats to banks or insurers”.

I'm sure we can all rest easy that the BoE is looking at this, clearly the top people in the country won't be fooled by the problem of leverage and act in the nations best interest....

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The rabble at the bankrupt of england are unfit for purpose, their record of taking any notice of financial stability issues when they were pumping the shit out of the housing and debt markets pre-2008 says all that needs to be said about them. Financial stability was a core remit then, they ignored it and were centre stage in creating the market distortions that brough the first mass runs on banks in 200 years.

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There's still a threat to stability ?

How unexpected.

I don't think hedge funds are a threat to stability. They're a fine scapegoat, but they're NOT the ones who've had bailouts. And they appear mostly to be in decline, having disappointed their investors.

They may have contributed to commodity price instability (a favourite of "greed" stories), but nowadays the main culprit there is another beast called ETFs.

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I don't think hedge funds are a threat to stability. They're a fine scapegoat, but they're NOT the ones who've had bailouts. And they appear mostly to be in decline, having disappointed their investors.

They may have contributed to commodity price instability (a favourite of "greed" stories), but nowadays the main culprit there is another beast called ETFs.

Indeed, these beastial pieces of paper should be behind serious cages and armed guards to stop them killing us.

promises, promises promises....the only danger in a promise is the other side dont keep theirs...

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I don't think hedge funds are a threat to stability. They're a fine scapegoat, but they're NOT the ones who've had bailouts. And they appear mostly to be in decline, having disappointed their investors.

They may have contributed to commodity price instability (a favourite of "greed" stories), but nowadays the main culprit there is another beast called ETFs.

Does banks needing bailouts who loan them money to gamble with not count?

When RBS put £167bn worth of bad loans in the Asset Protection Scheme and taxpayers were on the hook for poor performing loans, it included billions in loans to Hedge Funds in the Cayman Islands.

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Does banks needing bailouts who loan them money to gamble with not count?

I'd say no. It highlights a problem with the banks, just the same as excessive mortgage lending.

When RBS put £167bn worth of bad loans in the Asset Protection Scheme and taxpayers were on the hook for poor performing loans, it included billions in loans to Hedge Funds in the Cayman Islands.

Do you know how many billions? I don't.

Hedge funds today are a pale shadow of what they were before RBS collapsed.

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I'd say no. It highlights a problem with the banks, just the same as excessive mortgage lending.

Do you know how many billions? I don't.

Hedge funds today are a pale shadow of what they were before RBS collapsed.

£3.1bn

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I don't think hedge funds are a threat to stability. They're a fine scapegoat, but they're NOT the ones who've had bailouts.

Even Hedge funds can pose a systemic risk;

A financial firm borrows billions of dollars to make big bets on esoteric securities. Markets turn and the bets go sour. Overnight, the firm loses most of its money, and Wall Street suddenly shuns it. Fearing that its collapse could set off a full-scale market meltdown, the U.S. government intervenes and encourages private interests to bail it out.

The firm isn't Bear Stearns — it was Long-Term Capital Management, the hedge fund based in Greenwich, Connecticut, and the rescue occurred 10 years ago this month.

http://www.nytimes.com/2008/09/07/business/worldbusiness/07iht-07ltcm.15941880.html?pagewanted=all&_r=0

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