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Saxo Bank faces £70m losses after Swiss currency turmoil

Image copyright Saxo Bank
Image caption Saxo Bank said it could cover customers' losses resulting from the surprise Swiss National Bank decision

The Danish bank Saxo has admitted that it faces potential losses of more than £70m following the Swiss central bank's decision to allow its currency to float freely against the euro.

Saxo, which specialises in currency trading, said it was in contact with its customers.

However, the bank said that it could afford to absorb losses if they were unable to settle their accounts.

A number of brokers have been hit since the decision by the Swiss authorities.

Just over a week ago, the Swiss National Bank shocked markets by announcing that, with immediate effect, it would no longer fix its currency - the franc - against the euro.

Brokers caught out

That led to a surge in the value of the franc against the euro, at one point by 30%.

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Image caption Alpari UK had been the shirt sponsor of West Ham FC

It also caught some currency brokers by surprise - many of whose customers could not afford to settle their accounts.

That is because they had been trading "on margin", which means they had handed over only a fraction of their bets on Swiss francs.

The broker Alpari UK, which sponsors West Ham United football club, collapsed into administration as a result, while IG Index said its potential losses were £30m.

Now the Danish-controlled Saxo bank said that its losses could reach about £70m.

It said it was in talks with customers but had enough capital even if all of them were to default.

Steen Blaafalk, group chief financial officer of Saxo, admitted that the bank's foreign exchange margin policy was not sufficient, but said it had warned as early as September that the Swiss franc could face a storm: "As a result, we significantly reduced our clients' access to leverage. We did this both to protect clients and also to protect ourselves."

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