The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Frequent issuer business faces collateral damage

At the annual Euromoney Borrowers and Investors Forum last month, the great and the good of the sovereign, supranational and agency issuer community gathered in London to meet market participants.

Many of the conversations between issuers and dealers centred on the macro picture, or likely future supply and demand dynamics following record new-issue volumes in the first half of the year.

But behind the scenes, hidden in the nuts and bolts of clearing and settling derivative trades, there were increasingly tense talks on a problem that is responsible for draining substantial levels of liquidity from banks and whose cost could amount to tens of billions.

At the heart of the problem is the fact that credit support agreements (CSAs) – protocols that are essential for the conduct of derivative deals – were established in another era: one when bank funding was so cheap that it wasn’t even deemed a cost.

It is a problem that is not only complex but also where the costs are uncertain – both in terms of scale and timing.

CSAs came about as a means of eliminating credit risk in OTC derivative transactions. Ideally, all should be symmetrical two-way CSAs, meaning that both counterparties to a swaps trade may either receive or post collateral – depending on whether it is in or out of the money.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree