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(Bloomberg) -- Danish currency trader Saxo Bank A/S, stung by losses from the abrupt end to the cap on the Swiss franc, said there were signs late last year things might end badly.

“We did see this coming,” Steen Blaafalk, chief financial officer, said in a phone interview. “We warned clients in September, when we set our margin requirement on the franc up.”

Four months ago, Saxo started requiring clients to set aside 8 percent of their leveraged franc accounts, a fourfold jump, and limited the scope for borrowing by one-fourth to 12.5 percent. Blaafalk says investors and traders were angered by the move because at the time no one thought there was any reason to hedge against losses on trades involving the franc.

“That was criticized by clients and competitors,” Blaafalk said. “Today I only wish that we had raised it further.”

Saxo said yesterday there’s a risk it won’t be able to recover losses caused by the franc’s surge, declining to say how much the SNB’s move cost it. The bank will still be able to meet its regulatory capital requirements, it said.

The comments follow revelations that a number of the world’s biggest banks were caught on the wrong side of franc trades after the Swiss National Bank shocked markets last week by abandoning its peg to the euro. Citigroup Inc., Deutsche Bank AG and Barclays Plc suffered about $400 million in cumulative trading losses, people familiar with events said last week.

‘Skewed Community’

“In September, we saw a very skewed financial community,” Blaafalk said. “They all expected the peg to hold.”

The events show there’s a need for more regulatory control in currency trading, he said. “There has been too much competition on the margin requirement. Some minor brokers allow leverage up to 400 times,” Blaafalk said, without identifying the firms by name.

“When you increase the margin, clients can’t trade as actively,” Blaafalk said. “That’s some brokerages’ bread and butter. But some of us want to have a lifetime relationship with clients.”

To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net To contact the editors responsible for this story: Veronica Ek at vek@bloomberg.net Tasneem Hanfi Brogger, Edward Evans

Bloomberg