Editor's letter
Throughout the crisis in this market, Credit has recognised the need for - and inevitability of - significant regulatory change. We have been just as clear, though, that such intervention must be soberly applied, and the product of proper consultation with the institutions it will affect. This is not a defensive stance, but one born of the hope that new regulation will work, and of recognition that bad lending and ill-informed investment derive not from loose regulation but the optimistic sentiment accompanying bull markets and, indeed, bubbles.
It is in this spirit that we note with some alarm the tone and content of recent comments from regulatory and political figures about the derivatives market. In the US, it has been proposed in the Agriculture Committee that the CDS market be limited to a straightforward hedge, with 'naked swaps' - the holding of CDS contracts by investors other than the holders of the cash bonds - eradicated. In Europe, the European Commission has reacted impatiently to the time it has taken for a clearing house to established, with the French finance minister going so far as to call for the ECB to set one up itself.
The first measure is, as Isda's Bob Pickel explains in our interview (p. 26), simply too simplistic and could cause the demise of the credit derivatives market as we know it. The noise about clearing houses, though, is a deplorable departure from the principle that the market is best placed to decide how to address counterparty risk. The various competing attempts to establish a functioning central clearing house will take time to get up and running and - most importantly - attract dealer support. But once this happens and the industry votes with its feet as to which one (or ones) it favours, the best solution will have been found.
Matthew Attwood.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Prop shops recoil from EU’s ‘ill-fitting’ capital regime
Large proprietary trading firms complain they are subject to hand-me-down rules originally designed for banks
Revealed: the three EU banks applying for IMA approval
BNP Paribas, Deutsche Bank and Intesa Sanpaolo ask ECB to use internal models for FRTB
FCA presses UK non-banks to put their affairs in order
Greater scrutiny of wind-down plans by regulator could alter capital and liquidity requirements
Industry calls for major rethink of Basel III rules
Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say
Saudi Arabia poised to become clean netting jurisdiction
Isda AGM: Netting regulation awaiting final approvals from regulators
Japanese megabanks shun internal models as FRTB bites
Isda AGM: All in-scope banks opt for standardised approach to market risk; Nomura eyes IMA in 2025
CFTC chair backs easing of G-Sib surcharge in Basel endgame
Isda AGM: Fed’s proposed surcharge changes could hike client clearing cost by 80%
UK investment firms feeling the heat on prudential rules
Signs firms are falling behind FCA’s expectations on wind-down and liquidity risk management