More derivatives deals use collateral, says Isda survey

Derivatives dealers are increasingly relying on collateral to mitigate credit risk, according to the International Swaps and Derivatives Association (Isda). The amount of collateral in circulation in the derivatives markets now exceeds $250 billion, an increase of 25% over the previous year, according to the Isda Margin Survey 2001, released this week by the New York-based association.

Isda estimates the number of collateral agreements in the OTC derivatives market has grown to over 16,000, a 45% increase on the previous year's figure. The number of firms surveyed with large collateral programmes more than doubled to 21% in 2001 from 8% of respondents surveyed in 2000.

Across the range of institutions surveyed, an average 40% of the derivatives book was covered by collateral, said Isda. The most commonly used and accepted forms of collateral continue to be US government and agency securities and cash, followed by European government securities and cash. Results from the survey were gathered from responses of 43 Isda members and are available on the association’s website:www.isda.org.