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

    APRA Updates Validation and Derivation Rules in September 2020

    APRA updated the lists of the Direct to APRA (D2A) validation and derivation rules for authorized deposit-taking institutions, insurers, and superannuation entities.

    September 24, 2020 WebPage Regulatory News
    News

    EC Proposes Frameworks for Crypto-Assets and Operational Resilience

    EC adopted a package that includes the digital finance and retail payments strategies and the legislative proposals for regulatory frameworks on crypto-assets and digital operational resilience.

    September 24, 2020 WebPage Regulatory News
    News

    ECB Publishes Opinion on Proposals to Amend Securitization Framework

    ECB published an opinion (CON/2020/22) on proposals for regulations amending the securitization framework of EU, in response to the COVID-19 pandemic.

    September 24, 2020 WebPage Regulatory News
    News

    FCA Consults on Regulation of International Firms in UK

    FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.

    September 23, 2020 WebPage Regulatory News
    News

    MAS Amends Notice on Capital Adequacy Requirements of Banks

    MAS published amendments to Notice 637 on the risk-based capital adequacy requirements for reporting banks incorporated in Singapore.

    September 23, 2020 WebPage Regulatory News
    News

    FCA to Begin to Move Firms to New Data Collection Platform RegData

    FCA announced that it will move firms to RegData from Gabriel in the coming months in stages, based on the reporting requirements of firms.

    September 23, 2020 WebPage Regulatory News
    News

    ISDA Expects IBOR Fallbacks to be Effective by End of January 2021

    ISDA issued a letter to regulators to flag that it now expects the supplement to the 2006 ISDA Definitions and the Interbank Offered Rate (IBOR) Fallbacks Protocol to be effective around mid- to late-January 2021.

    September 23, 2020 WebPage Regulatory News
    News

    APRA Reviews Repayment Deferral Plans, Identifies Best Practices

    APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.

    September 22, 2020 WebPage Regulatory News
    News

    ESAs Assess Risks to Financial Sector After COVID-19 Outbreak

    ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.

    September 22, 2020 WebPage Regulatory News
    News

    BoE Confirms Withdrawal of COVID Corporate Financing Facility

    BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.

    September 22, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5836