Featured Product

    ECB Paper Examines the Interest Rate Swap Market in Euro Area

    February 15, 2019

    ECB published a paper that analyzes the structure of the interest rate swap market in Euro area after the start of the mandatory clearing obligation. The analysis provides new evidence to regulators and policy makers about the structure and activity in the interest rate swap market along the dimensions of risk-absorption and the impact of regulatory reforms such as the clearing obligation and the role of Basel III capital and liquidity ratios in influencing trade activity.

    For the analysis, the authors use a novel regulatory dataset of fully identified derivatives transactions. The dataset contains 1.7 million bilateral interest rate swap transactions of banks and non-banks. The key results are as follows:

    • The euro area interest rate swap market is highly standardized and concentrated not only around the group of the G16 dealers but also around a significant group of core “intermediaries” (and major central central counterparties).
    • Banks are active in all segments of the interest rate swap euro market whereas non-banks are often specialized.
    • When using relative net exposures as a proxy for the “flow of risk” in the interest rate swap market, the authors find that risk-absorption takes place in the core as well as the periphery of the network.
    • Among the Basel III capital and liquidity ratios, the leverage ratio plays a key role in determining the interest rate swap trading activity of a bank.
    • Also, after mandatory central clearing, there is still a large dispersion in interest rate swap transaction prices, which is partly determined by bank characteristics, such as the leverage ratio.

     

    Related Link: Working Paper (PDF)

    Keywords: Europe, EU, Banking, Interest Rate Risk, OTC Derivatives, Basel III, Clearing Obligation, Liquidity Risk, ECB

    Featured Experts
    Related Articles
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    News

    US Agencies Propose Changes to Call Reports and Instructions

    Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.

    July 22, 2021 WebPage Regulatory News
    News

    PRA Finalizes Rulebook Definition of Higher Paid Material Risk-Taker

    The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Examines Asset Encumbrance in Banking Sector

    The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Publishes Methodological Guide to Mystery Shopping

    The European Banking Authority (EBA) published a methodological guide to mystery shopping.

    July 21, 2021 WebPage Regulatory News
    News

    APRA Issues Update on Capital Reform Policy Settings for Banks

    The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.

    July 21, 2021 WebPage Regulatory News
    News

    CPMI-IOSCO Assess Continuity Planning of Market Infrastructures

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.

    July 21, 2021 WebPage Regulatory News
    News

    BoE Announces Changes to Validation Rules for Form BTL

    The Bank of England (BoE) published questions and answers (Q&A) on OSCA to BEEDS migration for statistical reporting as well a presentation from the project overview session held with statistical reporters.

    July 20, 2021 WebPage Regulatory News
    News

    BCBS Proposes Changes to Process for Reviewing G-SIB Methodology

    The Basel Committee on Banking Supervision (BCBS) is consulting on a technical amendment to the Basel Framework to reflect a new process reviewing the global systemically important bank (G-SIB) assessment methodology.

    July 20, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7281