Message-ID: <32076343.1075859389645.JavaMail.evans@thyme> Date: Tue, 27 Nov 2001 08:01:57 -0800 (PST) From: smarra@isda.org Subject: ISDA Press Report - November 27, 2001 Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Scott Marra X-To: X-cc: X-bcc: X-Folder: \Mark_Haedic_Jan2002\Haedicke, Mark E.\Inbox X-Origin: Haedicke-M X-FileName: mhaedic (Non-Privileged).pst ISDA PRESS REPORT - NOVEMBER 27, 2001 ISDA Names Mengle To New Position As Head Of Research Dow Jones Newswires By Joe Niedzielski The International Swaps and Derivatives Association said Monday that it had appointed David Mengle as head of research. Mengle will be responsible for providing research and analytical support for various ISDA committees and initiatives in this newly created position, ISDA said in a press release. In particular, Mengle will work on aspects of ISDA's risk management activities, providing technical assistance on issues surrounding the Basel capital accord. He will also oversee ISDA's market survey and will work to produce surveys in other areas. Over the past several years, Mengle assisted ISDA by conducting derivatives operations and documentation seminars and he will continue his involvement in this area, ISDA said. "David brings an enormous amount of industry and academic experience to ISDA," said Robert Pickel, ISDA's executive director and CEO. "His expertise in risk management, derivatives products and regulation will strengthen ISDA's mission to encourage the prudent and efficient development of the privately negotiated derivatives business," Pickel said in the statement Mengle was most recently with the consulting firm Rutter Associates. Previously, he was a vice president at J.P. Morgan and worked on a number of policy and capital related issues. Prior to that, he was a research economist at the Federal Reserve Bank of Richmond. David Mengle Appointed ISDA Head of Research ISDA Press Release - November 26, 2001 www.isda.org/press/press112601.html ISDA Appoints Head of Research Risk News - November 27, 2001 www.risknews.com CREDIT DERIVATIVES * End-users Build Up Experience - IFR REGULATORY * Treasury's Bair: Congress Should Pass Netting Laws This Year - Dow Jones * Momentum Builds For US Derivatives Insolvency Bill - Dow Jones * German regulator may follow US - Financial Times RISK MANAGEMENT * UK's FSA Consults On Implications Of Basel Accord Delay - Dow Jones * ISDA Names Mengle To New Position As Head Of Research - ISDA Press Release * ISDA Appoints Head of Research - Risk News End-users Build Up Experience IFR - November 24, 2001 End-users of credit derivatives in the US and Canada are trading an average of 65 deals a year and make use of with six to seven traders on average, according to a report released last week by consultant Greenwich Associates. "The larger the user, the more dealers they are using," said Peter D'Amario, principal at Greenwich and one of the authors. The multiple points of contact, though they complicate documentation for end-users, indicate that end-users are learning and triangulating what they are hearing, D'Amario said. As credit derivatives are still a relatively new market, this strategy may assist users in benefiting from price differentials. "They are still concerned enough to go around and talk with people," he added. The largest and most sophisticated users of credit derivatives report an average of 150 trades a year, according to the report. Banks were the biggest users of credit derivatives in terms of volume. Reinsurers and insurers, fund mangers and hedge funds, in that order, filled in the ranking of users, said D'Amario, noting that corporates ranked last on the list of users. About one-third of the corporates interviewed for the survey said they did not use credit derivatives. However, no other grouping is looking so aggressively at becoming involved in the market in the future. Roughly half of the corporates not currently using credit derivatives stated an intention to use them within the next year. The inter-dealer market was excluded from the survey. "Although [end-users] are using six or seven dealers, they are giving 80% of their business to three of their top dealers. The other three or four are fighting for 20% of the business," said D'Amario. "That's unsustainable. I wouldn't be surprised if there is a contraction in the average number of dealing relationships." Firms that do not offer a broad product array may be knocked out first. Greenwich said the dealers that fare best in its rankings are those that offer a depth and breadth of relationships, product knowledge, structuring ability and an understanding of client needs, D'Amario said. About 40% of end-users cited a relationship as a reason for picking a dealer, though 53% listed competitive quotes as their top reason for selecting a dealer. "When we asked people that, right off the bat they say competitive quotes. Then, we derive from data what [it is that] correlates with being one of a user's top three dealers. It is never competitive quotes. The real reason for selecting a dealer is relationships," D'Amario said. Treasury's Bair: Congress Should Pass Netting Laws This Year Dow Jones - November 26, 2001 By Rebecca Christie A senior Treasury official said Friday that Congress should find a way to pass so-called netting legislation, even if more broad-based bankruptcy legislation stalls. Sheila Bair, assistant secretary for financial institutions, told an American Bar Association committee that there was an immediate need for the proposal, which would make it easier for banks and businesses to settle financial contracts if one of the parties becomes insolvent. "The relevant provisions are a non-controversial portion of broader legislation to revise the bankruptcy laws. We are concerned, however, that the controversial issues of the broader legislation may not be resolved soon enough to allow its passage this year," Bair said. The proposed changes would limit market disruptions in the event of insolvency and also reduce the risks to federally regulated participants and to the overall financial system, Bair said. "Whether as part of comprehensive bankruptcy reform legislation or as a stand-alone bill, we believe that Congress should enact netting legislation this year. Further delays would unnecessarily place the financial system at greater risk," Bair said. Momentum Builds For US Derivatives Insolvency Bill Dow Jones - November 26, 2001 By Dawn Kopecki The nation's leading securities trading groups urged congressional leaders Tuesday to pass legislation that allows financial institutions and corporations to close out their derivatives contracts during an insolvency. "The current economic climate, worsened by the tragedy of Sept. 11, has made passage of these provisions...critical to the systemic risk reduction given the combination of market disruption and economic uncertainty," reads a letter sent Tuesday to House and Senate leaders from The Bond Market Association, The Financial Services Roundtable, International Swaps and Derivatives Association, the Futures Industry Association and a half dozen other financial organizations. Pressure to pass the legislation has mounted since the Sept. 11 terrorist attacks shut down U.S. financial markets and destroyed the Manhattan offices of many Wall Street brokerage houses. Even though no company went under as a result of the market disruption, the fear of institutional failures has grown, and support is mounting for passing the provision apart from the controversial bankruptcy bill to which it is attached. The measure allows institutions to quickly close outstanding derivatives with bankrupt trading partners by netting all the losses and gains of individual contracts into one deal. "Congress should not fail to enact netting legislation this year," Federal Reserve Chairman Alan Greenspan and Treasury Secretary Paul O'Neill wrote House lawmakers last month. "Further delays would unnecessarily place the financial system at greater risk." But congressional support for tightening U.S. bankruptcy laws has dwindled in the face of a probable recession. As a result, Rep. Pat Toomey, R-Pa., introduced the netting measure as its own bill in the House last week. "Although we support passage of these provisions as part of the larger bankruptcy-reform legislation....we share concerns of the key financial regulators that broader (bankruptcy) legislation may not be resolved soon enough to allow passage this year," the trade groups wrote. "We urge you and your leadership team to pass (netting legislation) as quickly as possible so that we do not miss an opportunity for enactment this year." German regulator may follow US Financial Times - November 27, 2001 By Bertrand Benoit The integration of European capital markets means Germany's securities regulator will need to model itself increasingly on the US Securities and Exchange Commission, according to Georg Wittich, the German authority's chairman. "One should examine whether the SEC might not be the appropriate structure for securities regulation in the future," Mr Wittich said in an interview. "We will have to go towards more centralisation at the German level as the need arises for increased co-operation between reg-ulators at the European level." Created in 1994, the Frankfurt-based Federal Supervisory Office for Securities Trading, or BAWe, is one of the few financial markets regulators in Europe not to act as supervisor for the stock exchange. For historical reasons, this responsibility lies with the government of the state of Hesse. Although BAWe is responsible for overseeing companies' official announcements to financial market participants, it has no power to investigate suspected cases of market manipulation and no authority to approve share offer prospectuses if they are linked to a public listing. While it is mandated to investigate insider trading, the authority has no right to sue or sanction offenders. Instead, it must transfer all suspected cases to a public prosecutor for criminal investigation. In practice, few insider-trading cases ever reach court. A planned bill, recently adopted by the German government and set for approval by parliament next year, would make BAWe responsible for fighting market manipulation, including the key prerogative to file civil claims against suspected offenders. From January, the authority will also be responsible for enforcing Germany's first compulsory takeover code. Meanwhile, despite opposition from the insurance industry and regional central banks, a draft bill by the finance ministry should result in the merger next year of BAWe with the federal bank and insurance regulators into a centralised financial supervisor. Yet there is no plan to give the watchdog authority over the Frankfurt stock exchange. "The separation of roles (with each state being responsible for policing stock exchanges on its territory) is above all historical," says Mr Wittich. "We have a high quality of supervision, but a rapprochement in this respect - which should be a matter the federal and state governments - is something to think about for the future." Germany's courts chase after companies, UK's FSA Consults On Implications Of Basel Accord Delay Dow Jones - November 27, 2001 By Sarah Turner The U.K.'s financial watchdog, the Financial Services Authority, said Tuesday that it has set out for consultation the implications of a one-year delay to the revised Basel Capital Accord on integrated prudential supervision for U.K. financial firms. The new Basel Accord framework is intended to improve the safety and soundness of the financial system by placing more emphasis on banking internal controls and management, the supervisory review process and market discipline. These international initiatives have been delayed until at least the start of 2005. The FSA's director of prudential standards, Clive Briault, said the FSA was previously planning to implement its integrated prudential sourcebook at the start of 2004, in line with the implementation of the new Basel Accord and related new European Union legislation. Briault said "we believe that we should not defer all the benefits of integrated regulation simply on account of the delays in international discussions." He added that "our preferred option is to implement as much as possible of the sourcebook early in 2004, while deferring those parts which will or may have to be changed significantly as a result of the international discussions." Key candidates for implementation in 2004 are sourcebook provisions relating to insurance companies, Lloyds insurance and friendly societies. Briault said other areas suitable for early implementation are systems and controls, investment firms not covered by the Investment Services Directive, operational risk and, in part, market risk. **End of ISDA Press Report for November 27, 2001** THE ISDA PRESS REPORT IS PREPARED FOR THE LIMITED USE OF ISDA STAFF, ISDA'S BOARD OF DIRECTORS AND SPECIFIED CONSULTANTS TO ISDA ONLY. THIS PRESS REPORT IS NOT FOR DISTRIBUTION (EITHER WITHIN OR WITHOUT AN ORGANIZATION), AND ISDA IS NOT RESPONSIBLE FOR ANY USE TO WHICH THESE MATERIALS MAY BE PUT. Scott Marra Administrator for Policy and Media Relations International Swaps and Derivatives Association 600 Fifth Avenue Rockefeller Center - 27th floor New York, NY 10020 Phone: (212) 332-2578 Fax: (212) 332-1212 Email: smarra@isda.org