Corporate hedges pressured ahead of EBA report

摘要

Some European banks are declining to quote prices for corporate interest rate swaps, amic rising pressure on hedging books arising from monetary easing and concern over a potential rise in capital costs, as regulators consider removing a key exemption. Companies that are habitually waived from paying collateral on swap positions are finding banks reluctant to do business as lower interest rates move legacy swap positions further in banks' favour. German rates have moved negative out to five years following the ECB's January move on quantitative easing. The rising difficulties come ahead of the publication next week of a crucial Europear Banking Authority report that is likely to herald the end of an exemption to bank capital charges for corporate counterparty risk exposures. "For many banks the cost of doing derivatives business with corporates is too high, and it may be about to get higher," said Jon Gregory, a counterparty risk consultant and senior adviser at Solum Financial. "Banks were already very in the money on corporate hedges and as rates have gone down some large corporates are now finding that banks won't quote for them on interest rate swap trades."