A transparency standard for derivatives.
Derivatives exposures across large financial institutions often contribute to – if not necessarily create – systemic risk. Current reporting standards for derivatives exposures are nevertheless inadequate for assessing these systemic risk contributions. In this paper, the author explains how a transparency standard, in contrast to the current standard, would facilitate such risk analysis. He also demonstrates that such a standard is implementable by providing examples of existing disclosures from large dealer firms in their quarterly filings. These disclosures often contain useful firm-level data on derivatives, but due to a lack of standardisation, they cannot be aggregated to assess the risk to the system. He highlights the important contribution that reporting the “margin coverage ratio”, namely the ratio of a derivatives dealer’s cash (or liquidity, more broadly) to its contingent collateral or margin calls in case of a significant downgrade of its credit quality, could make toward assessing systemic risk contributions.
Year of publication: |
2013
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Authors: | Acharya, V. V. |
Published in: |
Financial Stability Review. - Banque de France. - 2013, 17, p. 81-89
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Publisher: |
Banque de France |
Saved in:
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