Fed and Bank of England reportedly examine banks' exposure to large trading firms

The Federal Reserve and Bank of England are asking global banks about their exposure to large trading firms after turmoil at AI-focused hedge fund Situational Awareness caused losses at Jane Street, the Financial Times reported. The inquiries cover firms' risk appetite, banks' intraday exposure and the operation of risk controls. Situational Awareness reportedly sold most of its public-equities portfolio to Citadel Securities after AI and chip stocks fell sharply, contributing to a $15 billion hit at Jane Street. Reuters said it could not independently verify the report, and the regulators and Jane Street did not immediately comment.