ISDA urges India to remove credit-default swap rating rule
The International Swaps and Derivatives Association will "press" for Reserve Bank of India to remove a requirement that rupee-denominated credit default swaps must be tied to debt that has a credit rating.
By Agencies |
TOKYO: The International Swaps and Derivatives Association will "press" for India's Reserve Bank of India to remove a requirement that rupee-denominated credit default swaps must be tied to debt that has a credit rating.
"We don't think it should be a requirement even for the bond area, let alone the loan area," Robert Pickel, chief executive officer of ISDA told reporters on Thursday in Tokyo. "We will continue to press that concern if it's not addressed in some way."
Under revised central bank draft rules released, assets and obligations underlying credit-default swaps must carry a current credit rating. The requirement may constrain growth in India's credit-default swap market before it starts.
"If those restrictions weren't there, there would be a more conducive climate for greater use of credit derivatives," Pickel said. "In the loan market, it is going to be a significant hurdle."
Default swaps, used to protect buyers of debt against the risk of a default, help banks manage risks better and are "essential" for the long-term financial health of lenders, the central bank said in a statement.
Indian loans typically don't carry a rating and market is six times larger than the amount of corporate bonds in existence, according to calculations based on central bank data.
"We don't think it should be a requirement even for the bond area, let alone the loan area," Robert Pickel, chief executive officer of ISDA told reporters on Thursday in Tokyo. "We will continue to press that concern if it's not addressed in some way."
Under revised central bank draft rules released, assets and obligations underlying credit-default swaps must carry a current credit rating. The requirement may constrain growth in India's credit-default swap market before it starts.
"If those restrictions weren't there, there would be a more conducive climate for greater use of credit derivatives," Pickel said. "In the loan market, it is going to be a significant hurdle."
Default swaps, used to protect buyers of debt against the risk of a default, help banks manage risks better and are "essential" for the long-term financial health of lenders, the central bank said in a statement.
Indian loans typically don't carry a rating and market is six times larger than the amount of corporate bonds in existence, according to calculations based on central bank data.
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