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The Bank of England has asked lender in the city of London for information about market liquidity and if any of their clients have financing problems, as investors are supported by Donald Trump’s comprehensive tariffs.
Banks have been in contact with the authority of the BOE prudential regulation to discuss liquidity in the market and if they have any concern that certain clients such as protective funds may not be able to hear margin calls, according to people familiar with the matter.
So far officials have found some serious concern, these people said.
The US president’s announcement of the extensive tariffs of trade partners Wednesday took a market road that continued in Asia and Europe on Monday. US shares closed slightly lower after a day of wild swing.
Trump showed little indication that he would withdraw in his aggressive tariff policy even after some of his billionaire supporters publicly lobbied him to review him.
In the middle of the way, the Financial Times reported on Friday that defensive funds were hit with the largest margin calls since Pandemia Covid. Some Wall Street banks asked the defense fund clients to raise more money as security for their loans because the value of their properties had fallen, people said about the situation.
Failure of a margin call can cause a negative return loop, where protective funds are forced to sell assets to ensure liquidity, which can lead to further decline in the market.
Bank executives said they were still sucking on how Trump’s tariffs could affect their businesses, but that the sale of assets had been regular.
“Standard practice for us to implement close monitoring of market liquidity conditions in times of greater instability,” said a Bank of England spokesman.
The BOE Financial Policy Committee will provide an update on financial market conditions and the prospect of systemic risks when it issues its last meeting on Wednesday.
Sarah Breeden, Deputy Governor of BOE responsible for financial stability, is scheduled to deliver a speech on Thursday in which it will discuss the market road implications caused by Trump’s fees.
Separately, the US Industry Group Institute of Banking Policies convened a weekend call for its members, which included JPMORGAN CHASE JAMIE DIMON and Bank’s executive chief Brian Moynihan to discuss the fee impact, according to people familiar with the issue. The call was reported earlier by Sky News.
Jpmorgan and Bofa refused to comment. A BPI spokesman said the group does not comment on discussions or engagements among its members.
