BIS publishes OTC derivatives market report

BIS: CDS growth still strong

The Bank for International Settlements (BIS) has released its semi-annual statistics on the global OTC derivatives market for end-2006. The report found that overall market growth is slowing, except in credit default swaps. Growth in the over-the-counter (OTC) derivatives market slowed in the second half of 2006, falling back in line with long-term averages, the report noted. Notional amounts of all types of OTC contracts rose by 12% to $415 trillion at the end of December, after a 24% increase in the first half.

Within those trends, growth has stayed very strong in the credit segment, where the notional amounts of outstanding credit default swaps (CDS) increased by 42%. Growth fell to rates in the range of 5–11% in other risk categories. Gross market values, which measure the cost of replacing all existing contracts and thus represent a better measure of risk at a given point in time than notional amounts, remained roughly stable at $10 trillion at the end of December last year.

Gross credit exposures due to OTC derivatives, after netting agreements, were also stable at $2 trillion. The statistics cover the notional amounts and gross market values outstanding of the worldwide consolidated OTC derivatives exposure of major banks and dealers in the G10 countries.

BIS expects to release the OTC derivatives statistics for the first half of 2007, together with the results of the second part of the 2007 Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity, by no later than November 30 this year.

BaselAlert.com