Breaking: Saxo Bank Remains Well Capitalized, Albeit Facing up to $107 Million Losses
The Danish multi-asset brokerage has issued the full details unveiling the maximum prospective losses it is facing in the aftermath
In a filing made through the Irish Stock Exchange, Saxo Bank issued an additional statement revealing that the bank was facing up to $107 million in losses following the Swiss National Bank’s move last week.
In accordance with the terms and conditions of the notes, which SaxoBank placed on the Irish Stock Exchange in November last year, the company has submitted a notification to the holders of the notes informing them in detail about the effects of the Swiss black swan on the company’s capital.
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The company explained in the statement that a number of Saxo Bank’s customers ended up with insufficient margin collateral to cover their losses on positions in the Swiss franc.
While the Danish brokerage is still in the process of liaising with all of the firm’s clients to settle the unsecured amounts, some accounts will remain in the negative, as customers will not be able to the settle the balance in full, pushing Saxo Bank to write off the debts.
“Saxo Bank Group estimates the maximum loss that the Bank can incur in relation to the sudden material increase in the price of Swiss Franc on 15 January, 2015, to be DKK 0.7 billion equal to USD 107m on a net basis,” the statement reads.
Elaborating on core tier 1 capital requirements, the firm outlined that it remains very well capitalized:
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Taking the estimated maximum loss into account the Total Capital of Saxo Bank A/S and Saxo Bank Group would be DKK 1.97 billion and DKK 2.15 billion respectively.
The total Capital Requirement are DKK 1.46 billion and DKK 1.71 billion respectively and the CET 1 Capital Buffer would be DKK 0.41 billion and DKK 0.42 billion respectively. In comparison, the CET Capital Buffer was DKK 0.48 billion and DKK 0.44 Billion as of 30 June, 2014.
The CET1 Ratios are 11.9% and 10.7% for Saxo Bank A/S and Saxo Bank Group respectively and the Total Capital Ratios are 16.2% and 14.3%.
In the aftermath of the Swiss franc debacle, Forex Magnates was close in estimating the prospective losses of the Danish multi-asset brokerage, updating its estimates to between around $100 million.
In its 2013 annual report, Saxo Bank unveiled a negative adjustment to its operating income totaling about $38 million at current exchange rates (250 million Danish krone) due to a negative credit risk related to a rapid negative move on a CFD position of a customer of one of Saxo’s white label clients.
While the impact on the company’s balance sheet will be sizable, Saxo Bank’s capital structure will remain solid, even after the adjustment.
Great broker
Thank you for the correction Philippe!
Thank you for the correction Philippe!
Well capitalized LOL!!!
Rumors say that Drew Niv and Psimolophitis (fxpro) were advising them on risk management.
Also heard rumors that they will rebrand to Laiki Bank
Too bad. Does anybody know how Saxobank started into this business? Yeah, you can imagine. With shady strategies like betraying introducing brokers for their customer base.
But I guess, every broker in this industry has to start with “best practice” behavior, isn´t it?
“As you probably know, Saxo sent mails to customers who ask them to cover their losses after prices of transactions between euro and Swiss franc have been revised down. Please write an email to us at saxobankcheatedusersgroup@gmail.com if you have the same problem with Saxo. We are looking particularly for people living in Denmark since our plan is to hire an attorney to consult on further action. “
They have lost one third of tier 1 capital so now Saxo Group is significantly less capitalized and it appears they already tasted margin reversal effect recently. By comparison Interactive Brokers lost three years of profits in a few minutes on black thursday wich seems about the same as Saxo.
Thy should have lowered leverage on big accounts but that would have ampered their profits, they too are gamblers, see.
BYE, BYE, SAXO!
Clients, run away and take $$$ ’till to late!
http://brontecapital.blogspot.com/2015/01/it-is-time-to-close-saxo-bank-down.html
If you believe what Saxos Bank is doing is wrong, you need to speak up because if we don’t it might be your business getting “revised” and “amended” someday. The public and market needs to publicly shame this company to do right by its customers. And the regulators need to do their job.
http://firstadopter.tumblr.com/post/108694930189/how-is-what-saxo-bank-is-doing-to-its-clients
I found this: Saxo Bank is a retail foreign exchange trading bank. However the (a) lack of systems and (b) depth of the scam is revealed by Saxo’s statement after the giant Swiss Franc move. To quote: “Due to today’s exceptional market movement in CHF crosses, we have been filling client orders and positions in an extremely illiquid market. Once we are better able to establish true market liquidity, all executed fills will be revisited, and will be revised and amended to more accurate levels. This may result in a worse execution rate than the originally filled level.” It is… Read more »
As far as I know Saxo Bank doesn’t run a B book against its clients so it must cover their trades with the market (its the brokers which did have B books who were making money from their clients’ losses). Therefore I don’t think they would have profited from this. A lot of interbank trades with liquidity providers were cancelled after the move in EUR/CHF so presumably that must have been why the trades with clients were also adjusted. Carlos – if you look back at the news from September you’ll see that Saxo was slated then for reducing leverage… Read more »
MBarry, Saxo has always ran a B Book model for the majority of their clients so unfortunately your points are moot in this instance.
Barry is correct, many of the banks were cancelling trades or amending rates so I think Saxo trying to amend rates isn’t unreasonable and is how an OTC market works. The rate they want to amend to would probably be hard to justify and that is where the weakness is. Saxo don’t B book everything but neither do they STP everything.
Saxo doesn’t give a damn for their clients!
Saxo Bank is cheating customers after SNB removed EUR/CHF floor. Saxo Bank initially closed the EUR/CHF positions with market price, and after 12 hours they re-quoted the price and put with negative balance most of the customer’s accounts. This is not legal and we should act against Saxo Bank and defend the users.
Please if you are a victim of Saxo Bank with the same problem join our group to do a trial together in Denmark. Send e-mail to: saxobankcheatedusersgroup@gmail.com
@Matthew – was wondering your opinion on this since the product reminded me a bit about tradingwheels when I learned about.
“Also, this story implies systems (EAs) and their emotionless logic have an advantage over the emotional discretionary trader which I disagree with but hey – that’s what makes a market.”
Actually, the premise is based on that there are advantages to discretionary trading, but that emotions can influence performance. So traders are urged to trade the same, but with trading curbs applied which they don’t know when they are applied.
@Matthew – was wondering your opinion on this since the product reminded me a bit about tradingwheels when I learned about.
“Also, this story implies systems (EAs) and their emotionless logic have an advantage over the emotional discretionary trader which I disagree with but hey – that’s what makes a market.”
Actually, the premise is based on that there are advantages to discretionary trading, but that emotions can influence performance. So traders are urged to trade the same, but with trading curbs applied which they don’t know when they are applied.
Some updated news: (BFW) Danish FSA Says It’s Received Complaints Regarding Saxo Ba nk +———————————— ———————————— ——+ BN 01/29 14:07 *DANISH FSA COMMENTS ON SAXO BANK IN E-MAILED NOTE BN 01/29 14:07 *DANISH FSA SAYS IT WILL REQUIRE SAXO TO PROVIDE DETAILED REPORT BN 01/29 14:07 *DANISH FSA SAYS IT’S IN `CLOSE DIALOGUE’ WITH SAXO BANK BN 01/29 14:07 *DANISH FSA: COMPLAINTS RELATE TO SAXO’S HANDLING OF CHF TRADES BN 01/29 14:07 *DANISH FSA SAYS IT’S RECEIVED COMPLAINTS REGARDING SAXO BANK +———————————— ———————————— ——+ Danish FSA Says It’s Received Complaints Regarding Saxo Bank 2015-01-29 14:09:06.664 GMT By Frances Schwartzkopff (Bloomberg)… Read more »