Credit Derivatives Overhaul to be Postponed

The implementation of a new set of rules affecting the $21 trillion dollar credit derivative market will be delayed until September, according to the International Swaps and Derivatives Association (ISDA).

The rules will be addressing flaws in the credit derivatives market that were exposed during the financial crisis of 2008. Among the changes, the list of what triggers payouts will be expanded to include bail ins- where investors are forced to contribute to bank rescues- on top of bankruptcy, payment defaults, and restructuring.

The reasoning behind the delay in new credit derivatives rules is to give companies more time to prepare. ISDA spokesperson Nick Sawyer told Bloomberg, “We decided to allow people time to make the necessary adjustments to operations and infrastructure.”

The delay has caused the cost of insuring losses on certain types of debt sold by banks to rise.

Concerns by investors over credit derivatives were sparked by a payout triggered by a Dutch bank that covered a mere 4.5 percent of some losses.

The rules should be completed sometime in March, before the European Central Bank assumes the role of regulator in November, following a review of the region’s lenders.

Share this post

Share on facebook
Share on twitter
Share on linkedin
Share on pinterest
Share on print
Share on email

Stay On Top Of The Debt Relief Industry's Regulatory Landscape

On November 6-7, 2022, Shipkevich PLLC will be hosting a Regulatory Workshop in Costa Mesa, California focusing on the fundamental regulatory issues facing debt relief professionals and how they can adapt.