Trading and credit losses resulting from a U.S. prime brokerage customer’s default
First written in FY2022-Q1. 4 of 10 entries say "Mitigated", first in FY2023-Q3. Latest entry: FY2026-H1.
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- FY2026-H1WorsenedAnnual report
「At the end of the current interim consolidated fiscal period, the fair value of the aggregate outstanding principal of loans and receivables for which the fair value option was elected and whose contractual principal is guaranteed was ¥20 billion below the aggregate outstanding principal. None of the loans and receivables for which the fair value option was elected was more than 90 days past due.」
The shortfall of fair value below principal increased to ¥20 billion from ¥7 billion in the previous disclosure, while there were no loans more than 90 days past due. - FY2025-H1MitigatedAnnual report
「At the end of the current interim consolidated fiscal period, the fair value of the aggregate outstanding principal of loans and receivables for which the fair value option was elected and whose contractual principal is guaranteed was ¥7 billion below the aggregate outstanding principal. None of the loans and receivables for which the fair value option was elected was more than 90 days past due.」
The shortfall of fair value below principal for claims and other assets related to losses incurred by U.S. prime brokerage customers decreased to ¥7 billion from ¥48 billion at the end of March 2024, and there were no loans more than 90 days past due. - FY2024-Q3MitigatedAnnual report
「At the end of the third quarter of the current consolidated fiscal year, the fair value of the aggregate outstanding principal of loans and receivables for which the fair value option was elected and whose contractual principal is guaranteed was ¥27 billion below the aggregate outstanding principal. None of the loans and receivables for which the fair value option was elected was more than 90 days past due.」
The shortfall of fair value below principal for claims and other assets related to losses incurred by U.S. prime brokerage customers decreased to ¥27 billion from ¥49 billion at the end of June 2023, and there were no loans more than 90 days past due. - FY2024-Q1MitigatedAnnual report
「At the end of the first quarter of the current consolidated fiscal year, the fair value of the aggregate outstanding principal of loans and receivables for which the fair value option was elected and whose contractual principal is guaranteed was ¥49 billion below the aggregate outstanding principal. None of the loans and receivables for which the fair value option was elected was more than 90 days past due.」
The shortfall of fair value below principal for claims and other assets related to losses incurred by U.S. prime brokerage customers increased to ¥49 billion from ¥45 billion at the end of the previous consolidated fiscal year, but there were no loans more than 90 days past due, an improvement from the previous disclosure of a substantial shortfall below principal and past-due loans. - FY2023-Q3MitigatedAnnual report
「At the end of the third quarter of the current consolidated fiscal year, the fair value of the aggregate outstanding principal of loans and receivables for which the fair value option was elected and whose contractual principal is guaranteed was ¥320 billion below the aggregate outstanding principal. Most of the aggregate principal arose from claims for losses related to transactions with U.S. customers in March 2021. Of the loans and receivables for which the fair value option was elected, ¥293 billion was past due by more than 90 days.」
The shortfall of fair value below principal for claims related to losses incurred by U.S. prime brokerage customers narrowed to ¥320 billion from ¥347 billion at the end of the previous quarter, while loans more than 90 days past due decreased from ¥329 billion to ¥293 billion. A ¥1,910 million reversal of the CECL allowance was also recognized. - FY2023-Q2WorsenedAnnual report
「At the end of the second quarter of the current consolidated fiscal year, the fair value of the aggregate outstanding principal of loans and receivables for which the fair value option was elected and whose contractual principal is guaranteed was ¥347 billion below the aggregate outstanding principal. Most of the aggregate principal arose from claims for losses related to transactions with U.S. customers in March 2021. Of the loans and receivables for which the fair value option was elected, ¥329 billion was past due by more than 90 days.」
The shortfall of fair value below principal for claims related to losses incurred by U.S. prime brokerage customers widened to ¥347 billion from ¥267 billion at the end of the previous consolidated fiscal year, while loans more than 90 days past due totaled ¥329 billion. - FY2023-Q1WorsenedAnnual report
「As of the end of the first quarter of the current consolidated fiscal year, the fair value of the total outstanding principal of loans and receivables for which the fair value option had been elected and whose contractual principal was guaranteed was ¥336 billion below the total outstanding principal. Most of the total principal arose from claims related to losses on transactions with a U.S. client in March 2021. Among loans and receivables for which the fair value option had been elected, ¥311 billion was past due by 90 days or more.」
For claims related to losses involving the U.S. prime brokerage client, the shortfall of fair value below principal increased from ¥267 billion at the end of the previous consolidated fiscal year to ¥336 billion, while loans past due by 90 days or more totaled ¥311 billion. - FY2022-Q3RestatedAnnual report
「The company is taking measures, including improving risk management activities, in response to losses related to transactions with the U.S. prime brokerage client. However, the company’s business model necessarily includes significant trading activities, and as a result, it may record significant losses again in the future.」
The explanation was continued regarding losses arising from the U.S. prime brokerage client’s default and the liquidation of positions, the measures taken in response, and the possibility of recurrence in the future. - FY2022-Q2RestatedAnnual report
「Furthermore, following completion of the liquidation of the positions, an additional loss of ¥65.4 billion was recorded in the quarter ended 30 June 2021. The company is taking measures, including improving risk management activities, in response to losses related to transactions with the U.S. prime brokerage client. However, the company’s business model necessarily includes significant trading activities, and as a result, it may record significant losses again in the future.」
The explanation was continued regarding losses arising from the U.S. prime brokerage client’s default and the liquidation of positions, the measures taken in response, and the possibility of recurrence in the future. - FY2022-Q1First statedAnnual report
「For example, in March 2021, in a prime brokerage transaction with a U.S. client, a margin call was made but no funds were received, so the client was notified of its default and the contract was terminated, after which positions held to hedge transactions with the client were liquidated. Although the positions were liquidated while seeking to minimize the impact on the market and the company’s losses, a trading loss of ¥204.2 billion was recorded for the fiscal year ended March 2021. In addition, as the value of loans secured by securities pledged by the counterparty declined, an allowance for expected credit losses of ¥41.6 billion was recorded. Furthermore, following completion of the liquidation of the positions during the first quarter of the consolidated fiscal year ending 31 March 2022, an additional loss of ¥65.4 billion was recorded in the quarter ended 30 June 2021.」
Following a U.S. prime brokerage client’s default after a margin call and the liquidation of positions, a trading loss of ¥204.2 billion, a CECL allowance for loan losses of ¥41.6 billion, and an additional loss of ¥65.4 billion were recorded for the fiscal year ended March 2021 and the current quarter, respectively.