According to reports in the UK media this week, global banking giant HSBC issued a cautionary note to investors looking to improve returns through the use of “highly geared” financial instruments
Announcing record interim pre-tax profits for a European company of £5.1 billion ($9.3 billion), HSBC’s chief executive Stephen Green highlighted the "same matrix of risk" that is being focused on by the world’s largest financial firms because they use similar computer systems.
He warned that this system could trigger a mass liquidation of trading positions and destabilise the financial system.
Although Green was non specific with his language, observers have generally interpreted his remarks to mean hedge funds.
"The risk of market disruption rises as financial institutions use increasingly similar technology to manage risk. The possibility of volatility also increases as the investment sector becomes more highly geared in search of better returns," Green stated.
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