The traders live on financing and in markets that aren't making 5-sigma moves* the banks are comfortable with what is usually pretty liquid collateral.
And assuming the trader isn't all fraudy.
From Reuters:
Banks and trading companies are scaling down activities in Asia following the oil price collapse and financial problems at three companies including major Singapore trader Hin Leong, according to nine sources familiar with the matter.
The problems are threatening commerce in Singapore, Asia’s commodities trade hub, the banking and trading sources said. Billions of dollars of physical and derivative commodities change hands in the city-state in a supply chain that links financial institutions with traders and logistics companies that deliver fuel to the Asia-Pacific region and beyond.
The revelation of hundreds of millions of dollars of losses at HLT, one of Asia’s largest oil traders, came months after Agritrade International Pte Ltd entered into judicial management to restructure a $1.5 billion of debt, and Hontop Energy (Singapore) Pte Ltd went into receivership.
Scorched by losses at these companies and the crash in global oil prices since the start of the year, several banks are tightening credit and have also stepped up scrutiny on existing loans to oil trading companies, the sources said.*As we learned when Goldman claimed we were seeing 25-sigma moves during the 2007 quantquake, even four and five sigma are pretty rare:
All existing and new credit lines to commodities traders in Asia are being put under stringent review by banks’ senior management following HLT’s losses and the crash in oil prices, two senior bankers told Reuters. They represent leading global trade finance banks that are two of Hin Leong’s top-10 creditors.
One of the bankers, from a European lender, said there was concern there could be further defaults in the region as oil prices plunge. ...MUCH MORE
Here Is The Paper "How Unlucky Is 25 Sigma?" (25 Standard Deviation Moves Basically Don't Happen)
The 5-sigma event:
• a 5-sigma event is to be expected every 3,483,046 days or about 1 day every
13,932 years(!!)
