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ISDA Reports Credit Risk In OTC Derivs

The International Swaps and Derivatives Association has released a new analysis of counterparty credit risk management in the U.S. over-the-counter derivatives markets.

The International Swaps and Derivatives Association (ISDA) has released a new analysis of counterparty credit risk management in the U.S. over-the-counter (OTC) derivatives markets. As per the paper, the Office of the Comptroller of the Currency (OCC) reported that U.S. bank losses on OTC derivatives products due to counterparty defaults totaled less than $2.7 billion since 2007.

The paper also stated that netting and collateralization decreased net current credit exposure of the U.S. banking system to $107 billion. ISDA also examined the Securities and Exchange Commission’s reports of non-bank financial entities, as per which counterparty credit losses by non-bank financial entities relating to sub-prime mortgages and monolines overshadow the losses on plain vanilla OTC derivatives.

Click here for the release from International Swaps and Derivatives Association.

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