US bank CEOs warn of hidden market leverage risks

CEOs of the two largest US banks, Jamie Dimon of JPMorgan Chase and Brian Moynihan of Bank of America, have issued warnings regarding high levels of hidden leverage in financial markets. Dimon noted that while visible margin debt is at record highs, much of the risk lies in unrecorded borrowing through full-service brokers, hedge funds, and arbitrage strategies.

The warnings follow recent turbulence involving Situational Awareness, an AI-focused hedge fund led by Leopold Aschenbrenner. The fund, which grew to approximately $45 billion, faced margin calls on leveraged technology positions, forcing a rapid sale of its public portfolio to Citadel. Both JPMorgan and Bank of America served as primary brokers for the fund.

Beyond leverage, other market risks for the upcoming autumn include macroeconomic shifts related to elections in Sweden and the US, potential interest rate adjustments by the Riksbank due to inflation and energy prices, and the sustainability of the AI-driven growth trend in the technology sector.