UniCredit of Italy has become the biggest bank yet to say publicly it was not trading over-the-counter derivatives with US institutions, as industry specialists warned that incoming regulations were breaking the global links between markets and hurting liquidity.
TJ Lim, head of UniCredit’s capital markets business, told an industry gathering in Singapore last week that:
Uncertainty over the rules and concerns about their costs meant his bank had decided not to trade with US-based banks and other institutions. Although it will trade with the US arms of European companies, which are exempt from clearing.
Banks in Europe and Asia are concerned about the high costs and information requirements of reporting trades, and about broader compliance with the US rules if they register as swap dealers. Such costs would be a burden on banks that do not do very large volumes of business on US soil, bankers and lawyers say.
According to Kishore Ramakrishnan, a senior director in Ernst & Young:
“The mindset that’s emerging in this part of the world is number one, ‘I don’t want to do anything with US-facing entities’, which means number two, businesses are refocusing away from global markets to local industry markets.”
Full story is available in FT.com here
(My thanks to The OTC Space for bringing this story to my attention.)