Bank rules have negative impact on derivatives usage

A new Greenwich Associates report, New Capital Rules Complicate IRD Use, finds that new bank rules and central clearing requirements for derivatives trades are gradually starting to affect the mechanics of interest rate derivatives transactions used by many companies to hedge interest rate risk.

The report concludes that it is too early to determine if these changes will alter the economics of hedging to such a degree that corporate treasurers either look to new products to limit risk, or just reduce their hedging activity overall.

Nevertheless, ensuring safe but economical access to hedging products remains paramount, says Greenwich Associates consultant Thomas Jacques, author of the report.