European Union for greater transparency for default swaps on 8 banks

Huw Jones

London, 31 May

The European Commission will propose greater transparency in the trading of credit default swaps of eight top banks to mirror rules in U.S. markets, a European Union document seen by Reuters showed on Wednesday.

So-called single name credit default swaps (CDS) have come under regulatory scrutiny after the fall and state-backed rescue of Credit Suisse triggered high volatility on the CDS market for some systemic banks, Deutsche Bank in particular, on March 24.

“One of the conclusions on the events of Friday, 24 March, was that single name CDS contracts are opaque and illiquid,” the EU executive body said in a document for a meeting of EU states on Thursday.

 

This would explain why a single, rather small CDS contract can trigger major moves in the price of both the CDS reference entity’s debt and equity, said the paper which proposes “targeted amendments” to the bloc’s post-trade transparency rules for over-the-counter derivatives.

The Commission said it proposes to re-insert CDS on Santander, BNP Paribas, Credit Agricole, Deutsche Bank, ING Bank, Intesa Sanpaolo, Societe Generale and DZ Bank into the scope of derivatives transactions subject to post trade transparency.

Credit Suisse axes China bank plan Credit Suisse has scrapped plans to set up a locally incorporated bank in China to avoid a potential regulatory conflict arising as a result of its merger with UBS, said two sources with direct knowledge of the matter.

In China, a financial entity can apply for and get only one such license.

Credit Suisse bankers leaving by the hundreds Hundreds of Credit Suisse’s employees are resigning each week in a sign of uncertainty gripping the lender while it is being taken over by rival UBS, two people familiar with the matter said on Wednesday.

US banks saw record deposit declines in Q1

US banks saw total deposits decline by a record 2.5 per cent in the first quarter of 2023, and industry-wide profits were relatively flat after taking into account the effects of two large bank failures, said the Federal Deposit Insurance Corporation.

The FDIC said the $472 billion in deposit outflows in the first quarter was the largest it had recorded since it began collecting such data in 1984. The decline was primarily from uninsured funds, as insured deposits rose $255.1 billion, or 2.5 per cent, amid the failures of Silicon Valley Bank and Signature Bank. Reuters