Wednesday, June 23, 2010

Swaps Push-Out to Have Major Impact on U.S. Dealers

According to a Moody's report published on June 21:
If enacted into law, the “swaps push-out” will make it impossible for major U.S. dealers to conduct market-making of OTC derivatives -- a major franchise and a large earnings contributor -- within their U.S. bank subsidiaries. Housing OTC derivatives within the lead bank offers dealers funding and capital efficiencies, and makes them more desirable counterparties from a credit risk standpoint. Losing these advantages and moving positions to a different subsidiary can have material franchise, operational and, possibly, capital implications for U.S. dealers…

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