Regulators move to limit derivatives-supported debt in Asia

Identifying diverse funding sources and managing the associated market risks have become top priorities for Asia Pacific treasury managers who saw worst-case liquidity conditions realised during the global financial crisis. While cross-border activity has increased for both corporate borrowers and investors, some regulators have moved to limit the growth of derivative-supported debt. Joti Mangat reports

After an extended period of volatility during the global financial crisis, when the evaporation of US dollar liquidity drove the Asian foreign exchange basis into positive territory, the subsequent deluge of dollars into the region during the past two years has reversed the trend, sending the basis swap into negative territory in most cases and limiting volatility.

“The premium associated with dollar scarcity has significantly reduced as a result of global policy measures and the flow of private