ISDA®              

INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION

NEWS RELEASE

For Immediate Release Tuesday, November 12, 2002

For More Information, Please Contact:

Stacy Carey, ISDA New York, (212) 901-6000; Fax (212) 901-6001; scarey@isda.org

 

ISDA 2002 MARGIN SURVEY REPORTS $437 BILLION OF COLLATERAL IN USE; 75% INCREASE OVER 2001 LEVELS

 

NEW YORK, Tuesday, November 12, 2002 - Collateral use in privately negotiated derivatives transactions and related margined activities, such as repo and structured products, continues to grow in significance as the amount of collateral in circulation exceeds $437 billion, according to the 2002 Margin Survey released today by ISDA. The results of ISDA’s 2002 Margin Survey highlight a 75 percent increase over the $250 billion of collateral in circulation reported in the ISDA 2001 Margin Survey.

 

 “The growth in collateral use demonstrates the commitment of derivatives dealers and end-users to effectively manage counterparty credit exposures,” said Robert G. Pickel, ISDA’s Executive Director and Chief Executive Officer.” 

 

Of the 71 firms responding to the 2002 Survey, 46 are banks, 22 are other financial service firms and 3 are energy firms. This is a significant increase over the 43 respondents in the 2001 Survey. Survey respondents report over 28,000 collateral agreements in place, compared with 16,000 in the 2001 Survey and 11,000 in the 2000 Survey.  Credit risk reduction continues to be the most important reason for respondents to use collateral; next in importance is regulatory capital savings.  Other factors include access to more complex trades and the ability to price more competitively. Respondents in this year’s Survey forecasted further growth in collateral agreements of 19 percent during 2002.

 

Respondents further report that collateral covers about half of fixed income derivatives trade volume and 40 percent of counterparty credit exposure.  The 36 percent reduction in exposure among small collateral programs – about one third of respondents – demonstrates that a small number of agreements can yield significant credit exposure reduction.

 

The Survey is designed to describe and communicate the current status of collateral management in an objective and consistent manner, track the extent to which firms adopt practices recommended in the ISDA Guidelines for Collateral Practitioners and the 1999 Collateral Review and provide industry participants with information to assist in internal collateral functions. The Survey is also designed to provide new entrants to the market with baseline data to evaluate the benefits and opportunities of collateral management and to promote greater transparency by increasing the understanding of collateral management. The full Margin Survey can be accessed under the What’s New section of ISDA’s web site.

 

ISDA is the global trade association representing leading participants in the privately negotiated derivatives industry. ISDA was chartered in 1985, and today has more than 590 member institutions from 46 countries on six continents. These members include most of the world's major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities. Information about ISDA and its activities is available on the Association's web site: www.isda.org.

 

®ISDA is a registered trademark of the International Swaps & Derivatives Association, Inc.

 

 

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