Changes to OTC derivatives likely will be disruptive for banks

07/26/2010 | Risk.net (subscription required)

Regulatory-reform legislation recently signed into law by President Barack Obama aims to route more over-the-counter derivatives through exchanges, a move that likely will boost clearers and exchanges but be disruptive for banks. Regulators think central clearing counterparties will limit counterparty risk, but there is concern about how that will impact dealers with higher credit standings. "Dealers that currently benefit from their strong counterparty credentials, such as JP Morgan, could see their pricing power and market share pressured," according to a report from Moody's Investors Service.

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