Counterparty Risk, Impact on Collateral Flows and Role for Central Counterparties

by James Aitken, Manmohan Singh

Series: IMF Working Papers

Subject categories
ISBNs
  • 1451917473
  • 9781451873207
  • 9781451917475
  • 9781452774282
Counterparty risk in the United States stemming from exposures to OTC derivatives payables (after netting) is now concentrated in five banks?Goldman Sachs, JPMorgan, Bank of America, Morgan Stanley and Citi. This note analyzes how such risks have shifted over the past year. We estimate that the adverse impact of counterparty risk on high-grade collateral flows and global liquidity due to decrease in rehypothecation, reduced securities lending, and hoarding of cash by major banks is at least $5 trillion. In order to mitigate counterparty risk, there have been regulatory initiatives to establish central counterparties (CCPs). From a policy perspective, counterparty risk remains large at present and recent experience has shown that OTC derivative positions are not supported by sufficient capital, constituting a major risk for participants in this market.
  • International Monetary Fund; August 2009
  • ISBN: 9781451917475
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  • Title: Counterparty Risk, Impact on Collateral Flows and Role for Central Counterparties
  • Series: IMF Working Papers
  • Author: James Aitken; Manmohan Singh
  • Imprint: INTERNATIONAL MONETARY FUND
Subject categories
ISBNs
  • 1451917473
  • 9781451873207
  • 9781451917475
  • 9781452774282
Subject categories
ISBNs
  • 1451917473
  • 9781451873207
  • 9781451917475
  • 9781452774282