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London — The implosion of a South African company has caused a hangover for one of Wall Street’s most opaque businesses. When shares in Steinhoff International Holdings crashed in December, global investment banks lost more than $1bn tied to so-called corporate equity derivatives. That’s equivalent to almost one-third of the revenue generated last year from such deals, which allow large clients to use shares to fund investments. The scale of the losses has shaken up a business that’s grown as stock markets surged and been a key source of funds for banks’ most prised customers: billionaires, sovereign wealth funds and acquisitive Chinese conglomerates. Some lenders are now pulling back, selling assets or questioning the size of future transactions as risk officials across the industry ask more questions, executives said. Others see opportunity and have moved on to arrange more complex trades for deal-hungry clients including Zhejiang Geely Holding Group (Geely) founder Li Shufu. "Som...

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