Isda launches Chinese collateral glossary

The International Swaps and Derivatives Association today launched a Mandarin/ English glossary of collateral terms, as it seeks to encourage the use of collateral in credit risk mitigation for the Chinese-speaking world.

Transaction volumes for privately negotiated derivatives have increased rapidly at institutions that conduct their day-to-day business in Mandarin in recent years, but the use of collateral risk management strategies has proven limited within some banks, as their front and back offices are often unfamiliar with the complex terminology.

Mark Brown, chair of Isda’s Asia-Pacific collateral committee, said the glossary would streamline communication within banks and encourage the use of such risk management tools. But he predicted banks would still predominantly use industry-standard English when drawing up contracts, even for deals between two Chinese banks.

“When we went to talk to our Chinese counterparts about collateralising risk exposure, they hadn’t even heard of these things, and collateral requires the different areas of the bank to interact,” said Brown, who is head of portfolio strategy and execution in the Asia-Pacific region for ABN Amro in Hong Kong. “Enough of us over here saw the benefit of seeing people understand these terms in their own language.”

Mandarin-speaking operations staff from several of the larger banks were drafted in to write what is the first foreign-language reference tool to be issued by the association. Brown said Isda had previously been “reticent” to issue such glossaries because of possible legal problems arising from translations.

Mandarin is the official language of China and Taiwan, and is spoken widely through the Asia-Pacific region, most notably in Singapore.