eToro Implements New Restrictions on Leverage in Banking

eToro Implements New Restrictions on Leverage in Banking

eToro, a social trading network based in Israel, has implemented new restrictions on leverage for trading positions in the banking sector. The platform issued a notice to its clients on Tuesday stating that the maximum leverage for new positions would be limited to X1, citing the “current situation.” This decision follows recent upheavals in the financial industry, including the collapse of Silicon Valley Bank, a US-based lender focused on early-stage companies, which sent shockwaves across the global financial sector. Regulators also abruptly shut down Signature Bank as a result of these developments, and Silvergate Bank, a crypto-friendly institution, wound down its operations and liquidated its assets.

These events have cast a shadow on US bank shares, with First Republic Bank’s stock price falling by over 60% on Monday. eToro’s announcement of reduced leverage in the banking sector indicates a cautious approach to these market shifts and a recognition of the risks involved. However, the company also noted that existing positions will not be affected by this policy change.

Leverage is a financial tool that allows investors to amplify their gains, but it also increases potential losses. Limiting leverage in a high-risk sector such as banking can help reduce the risk of significant losses in the event of market turmoil. eToro’s decision to reduce leverage in this sector is a prudent move that could protect its clients from potential losses.

The Expansion In Crisis

eToro is a social trading network that operates in 140 countries, offering customers the ability to trade in a variety of financial instruments, including stocks, commodities, currencies, and contracts for difference.

However, recent developments in the US banking industry have led eToro to restrict leverage positions in the sector to a maximum of X1, citing risk management concerns. The company noted that this restriction will remain in place until additional leverage can be enabled under their risk management criteria.

Despite these developments, eToro has been expanding its portfolio of stocks available to its clients. In late January, the company launched a new smart portfolio called ‘InvestorAI-US’ in partnership with UK startup Bridgeweave, which uses artificial intelligence (AI) to provide retail investors with exposure to the stocks of 12 high-growth US companies.

In addition, eToro recently launched SocialSentiment, a new portfolio that offers retail investors exposure to US-listed companies known for their solid environmental, social, and governance (ESG) efforts. These new offerings demonstrate eToro’s commitment to expanding its product portfolio and providing customers with a diverse range of investment opportunities.