(by Nick Band)

On Thursday, U.S. banks defended themselves against accusations that came from a senior regulator in hedge funds case.

Banks fend off regulator’s claims while admitting that some of their peers were "low-balling" to gain lucrative trading income and gain market share, Financial Times says.

"I think it is a generalisation. It is clear that banks are trying hard to gain hedge fund business because it is hot and it is profitable. But lending is generally fully collateralised and risk management tools are much more sophisticated than they were five years ago," said Tarek Mahmoud, managing director at Dresdner Kleinwort Wasserstein in London.

Some of the banks were accused of lowering their initial margin requirements and not performing sufficient due diligence in their relationships with hedge funds.