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BTRM Webinar: Counterparty Credit Risk for Derivatives: 14.00 GMT

Counterparty credit risk for derivatives by Faculty BTRM

Even in a centrally cleared, collateralised world, banks’ risk exposure to derivatives markets remain significant. “Know your risk” is as important to Boards, EXCOs and CROs as ever. The BTRM Faculty notes how unusually large price movements in a volatile market can generate increased counterparty credit risk on derivative exposures that are potentially “unseen” until it’s too late. The webinar will discuss:

  • Losses from the forced unwinding of collateralised equity swaps when a counterparty defaults can be a multiple of what is predicted by commonly used risk models and covered by initial margin;
  • The spike in energy prices in August 2022 showed that banks had, as clearers of their clients, many billions at risk;
  • The rise in UK gilt yields in September 2022 caused difficulties for UK FIs to meet their margin requirements arising out of their derivatives positions and required the BoE to intervene

Large derivatives counterparty concentrations can be difficult to detect. We present a “lessons learned” for bank executives to incorporate into their risk management processes.

Kevin Liddy:

Senior Consultant, Solum Financial Limited

Kevin Liddy: Senior Consultant, Solum Financial Limited

Kevin has 30 years of experience in trading, risk management and consultancy. He has acted as an expert witness and been deposed in the US courts. Prior to joining Solum Financial Kevin worked at Chase Manhattan, Bear Stearns, Nat West and Royal Bank of Scotland. At Royal Bank of Scotland he was Global co-head of Counterparty Exposure Management responsible for the Pricing, Management and Trading of all counterparty risk activities. In addition Kevin was Global Head of STIRT, responsible for all Delta trading products in the short end of the curve. Previously at Bear Stearns and Chase Manhattan he was head of Sterling derivative trading.  Kevin holds a BSc. Hons in Applied Science from Kingston University.

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