Thursday, April 17, 2008

Derivative collateral use increases 60 percent (ISDA)

ISDA 2008 PRELIMINARY MARGIN SURVEY RESULTS SHOW COLLATERAL USE AT $2.1 TRILLION; 60 PERCENT INCREASE IN CIRCULATION

VIENNA, Wednesday, April 16, 2008 – Use of collateral in privately negotiated derivatives transactions grew significantly in 2007, with the amount of collateral in circulation now estimated at $2.1 trillion. The International Swaps and Derivatives Association, Inc. (ISDA) today released preliminary results from its 2008 ISDA Margin Survey at its 23rd Annual General Meeting in Vienna.

The results show an increase of almost 60 percent over the estimated $1.335 trillion of collateral in the 2007 Survey. Cash continues to grow in importance among most firms, and now stands at over 78 percent of collateral received and 83 percent of collateral delivered.

ISDA’s 2008 Margin Survey reflects continued importance of collateralization as a risk mitigation tool and the effectiveness of collateral agreements,” said Robert Pickel, Executive Director and Chief Executive Officer, ISDA.

The 2008 Survey reports that collateral agreements in place grew to over 149,000, of which 74 percent are two-way agreements. Among firms that responded both in 2007 and 2008, collateral agreements grew by 18 percent. Respondents forecast further growth of 20 percent during 2008.

The 2008 Margin Survey also finds that collateral coverage continues to grow, both in terms of trade volume subject to collateral agreements and of credit exposure covered by collateral.

For all over-the-counter derivatives transactions, 63 percent are subject to collateral agreements, compared with 59 percent last year. Furthermore, 65 percent of credit exposure for privately negotiated derivatives is now covered by collateral, compared with 59 percent last year.

Of the 107 firms responding to the 2008 ISDA Margin Survey, 85 are banks or broker-dealers, and the remaining are institutional investors and end users.

No comments: