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(Bloomberg) -- The $400 million of cumulative losses that Citigroup Inc., Deutsche Bank AG and Barclays Plc are said to have suffered from the Swiss central bank’s decision to end the cap on the franc may be followed by others in coming days.

“The losses will be in the billions -- they are still being tallied,” said Mark T. Williams, an executive-in- residence at Boston University specializing in risk management. “They will range from large banks, brokers, hedge funds, mutual funds to currency speculators. There will be ripple effects throughout the financial system.”

Citigroup, the world’s biggest currencies dealer, lost more than $150 million at its trading desks, a person with knowledge of the matter said last week. Deutsche Bank lost $150 million and Barclays less than $100 million, people familiar with the events said, after the Swiss National Bank scrapped a three- year-old policy of capping its currency against the euro and the franc soared as much as 41 percent that day versus the euro. Spokesmen for the three banks declined to comment.

Marko Dimitrijevic, the hedge fund manager who survived at least five emerging-market debt crises, is closing his largest hedge fund, which had about $830 million in assets at the end of the year, after losing virtually all its money on the SNB’s decision, a person familiar with the firm said last week.

FXCM Inc., the largest U.S. retail foreign-exchange broker, got a $300 million cash infusion from Leucadia National Corp. after warning that client losses threatened its compliance with capital rules. FXCM, which handled $1.4 trillion of trades for individuals last quarter, said it was owed $225 million by customers.

Popular Trade

Shorting the franc was a popular trade and most firms would leverage their positions some 20 times or more, said Williams, who consults for hedge funds. With such leverage a 5 percent move against the position wipes out all the value, yet the trades were seen as relatively low-risk by models used by financial institutions because volatility of the franc was reduced by the SNB’s cap, he said.

Citigroup had reported an average total trading value-at- risk, a measure of how much the company could lose in trading in one day, of $105 million in the third quarter, of which $32 million was attributed to foreign-exchange risks. Deutsche Bank’s so-called stressed value-at-risk, which measures possible daily losses in market turmoil, averaged 109 million euros ($126 million) in the first nine months, with 27 million euros related to foreign-exchange risks.

Still Gambling

“The banks’ losses aren’t large but what it does show is that they are still gambling by taking positions,” said Gordon Kerr, a former banker and consultant at London-based Cobden Partners, an adviser to governments. “Brokers that lost money will worry about being shunned by clients, which might pull liquidity.”

Banks may also suffer because of prime brokerage services, which include activities such as securities lending, trade execution and cash management for hedge funds. Citigroup’s losses aren’t tied to its relationships with FXCM and other retail trading platforms, the person, who asked not to be identified because the information hasn’t been disclosed publicly, said last week.

Swiss banks, which haven’t announced any losses so far, will probably also suffer in the longer term, said Arturo Bris, a professor at the Lausanne-based IMD business school.

“The negative effects for the Swiss banks come in two ways,” Bris said. “First, it will reduce the flow of assets from the outside and will encourage the exit of Swiss money to other countries. Secondly, they will be hurt by the negative impact on the Swiss economy.”

Pain from wrong-way bets may not be limited to just the financial industry.

“We’re just hearing about financial institutions now,” Philip Guarco, global head of fixed-income strategy at JPMorgan Private Bank, said in an interview on Bloomberg Television. “Remember what happened back in 2009, when the dollar rallied? You actually had major corporates in Mexico and Brazil, where the treasury departments were taking positions in FX. So we haven’t heard the end of it yet.”

--With assistance from Macarena Munoz in Madrid and Elisa Martinuzzi in Milan.

To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net Frank Connelly, Simone Meier

Bloomberg