Banks scrutinised for offloading deal contingent risks on to funds

Critics say practice could lead to disclosure of sensitive client data

Banks offering deal contingent hedges are divided over whether it is appropriate to offload the risk of the underlying transactions falling through on to hedge funds.

Market participants say that although the practice has been around for years it has become increasingly necessary, as higher volatility places a strain on banks’ capacity to take on deal contingent client trades. Not every bank offloads risk in this way, and Risk.net understands that only a handful of deal contingent trades involve