China’s caution on compression stretches global banks’ risk limits

Systems lags and lack of capital pressure blamed for apathy on swaps compression

Chinese bank counterparties’ compression activity still has a long way to grow

Try as they might, global lenders cannot coax their Chinese bank counterparties to compress the large books of renminbi swaps they’ve racked up between them in recent years. At a time when Chinese corporates are bingeing on dollar debt, fuelling demand for currency swaps, that leaves foreign dealers with a large and increasingly costly headache.

“For currency swaps, we are already finding it quite difficult. We are easily running out of limit against [Chinese bank counterparties], and they are

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