The Importance of Close-Out Netting

  • Close-out netting has reduced over-the-counter derivatives credit exposure by over 85%. Without the benefits of netting, banks worldwide might face a capital shortfall of over $500 billion.
  • Close-out netting is necessary because it enables derivatives participants to protect against adverse market changes following default of a counterparty.
  • Policy-makers have consistently supported the enforceability of close-out netting because it promotes financial system stability.
  • Current proposals designed to promote orderly resolution of failed financial institutions should be crafted carefully to avoid weakening the benefits of close-out netting.

Documents (1) for The Importance of Close-Out Netting

ISDA AGM Studio: Jacques Vigner, BNP Paribas

Jacques Vigner, ISDA board member and chief strategic oversight officer for global markets at BNP Paribas, speaks with Mark Gheerbrant, global head of risk and capital at ISDA, on the key obstacles to a consistent, risk-appropriate capital framework and how to...

ISDA AGM Studio: Future Leaders in Derivatives

Following publication of the latest whitepaper from the ISDA Future Leaders in Derivatives (IFLD) program, Collateral and Liquidity Efficiency in the Derivatives Market: Navigating Risk in a Fragile Ecosystem, Joel Clark talks to IFLD participants Koen Ottenheijm, senior treasury and...