BIS: Derivatives Dealers Should Report to Central Banks Like Child Molesters Report to Their Neighbors

Monday, September 14, 2009 , , , 0 Comments

Transparency in derivatives markets? Oh please, BIS.


Central banks should coordinate global oversight of derivatives clearinghouses and consider offering them access to emergency funds to limit systemic risk, according to the Bank for International Settlements.

Regulators are pushing for much of the $592 trillion market in over-the-counter derivatives trades to be moved to clearinghouses which act as the buyer to every seller and seller to every buyer, reducing the risk to the financial system from defaults. The drive was spurred by the collapse of Lehman Brothers Holdings Inc. and the rescue of American International Group Inc., two of the biggest credit-default swaps traders.

“The crisis has exposed the need for international coordination of the oversight of systemically important” clearinghouses, BIS analysts Stephen Cecchetti, Jacob Gyntelberg and Marc Hollanders wrote in a report published today. An important and unresolved question is whether clearinghouses “should have access to central bank credit facilities and, if so, when,” they wrote.

JPMorgan Chase & Co., Goldman Sachs Group Inc. and 13 other derivatives dealers last week told the Federal Reserve Bank of New York they will submit 95 percent of new credit-default swaps trades to clearinghouses. They made similar commitments for interest-rate derivatives.

Intercontinental Exchange Inc., owner of the largest credit-default swap clearinghouse, said last week it will make it easier for hedge funds and other bank clients to access its service to guarantee trades starting next month.

Move along now, nothing to see here...

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.