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The Bank of England has asked lenders in the City of London for information about market liquidity and whether any of their clients are having funding problems, as investors reel from Donald Trump’s sweeping tariffs.
Banks have been in contact with the BoE’s Prudential Regulation Authority to discuss liquidity in the market and whether they have any concerns that certain clients such as hedge funds may not be able to heed margin calls, according to people familiar with the matter.
PRA officials have so far found little sign of serious distress, these people said.
The US president’s announcement about wide-ranging tariffs on trading partners on Wednesday last week unleashed a market rout that continued on Monday in Asia and Europe. US stocks closed slightly lower after a day of wild swings.
Trump showed little indication of rowing back on his aggressive tariffs policy even as some of his billionaire supporters publicly lobbied for him to revisit it.
Amid the rout, the Financial Times reported on Friday that hedge funds were hit with the biggest margin calls since the Covid pandemic. Several Wall Street banks asked hedge fund clients to stump up more money as security for their loans because the value of their holdings had tumbled, people briefed on the situation said.
Failure to meet a margin call can trigger a negative feedback loop where hedge funds are forced to sell assets to secure liquidity, which can lead to further declines in the market.
Bank executives said they were still absorbing how Trump’s tariffs could affect their businesses but that the selling of assets had been orderly.
“It is standard practice for us to implement close monitoring of market liquidity conditions at times of greater volatility,” said a Bank of England spokesperson.
The BoE Financial Policy Committee is due to provide an update on financial market conditions and the outlook for systemic risks when it releases on Wednesday the record of its latest meeting.
Sarah Breeden, the BoE deputy governor with responsibility for financial stability, is scheduled to give a speech on Thursday in which she will discuss the implications of the market rout caused by Trump’s tariffs.
Separately, US industry group the Bank Policy Institute convened a call over the weekend for its members, which included JPMorgan Chase boss Jamie Dimon and Bank of America chief executive Brian Moynihan, to discuss the impact of the tariffs, according to people familiar with the matter. The call was reported earlier by Sky News.
JPMorgan and BofA declined to comment. A BPI spokesperson said the group does not comment on discussions or engagements among its members.
