A state of flux
Efforts to improve the risk architecture for the derivatives business in Asia appear more muted than elsewhere, with many regulators in the region taking a wait-and-see approach towards central counterparty. But, as Duncan Wood reports, there are some notable exceptions
Before the current financial crisis, there was a widespread and cosy assumption that counterparty risk was practically non-existent when dealing with major banks or AAA-rated entities. Sometimes, when an individual exposure got large enough, collateral would be posted to make it more manageable. In many cases, interbank trades were not collateralised at all.
Today, that seems naive. Crippling losses suffered by AIG forced the US government to provide the insurer with a huge credit facility - up
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