EU stress tests show €14bn funding burden on Italy swaps

EU-wide stress test shows a group of 14 banks with net positive derivatives exposure to Italy. Because the country’s debt office does not collateralise, this implies a “massive funding requirement”, says one trader

Dipartimento del Tesoro

Italy had almost €90 billion of uncollateralised derivatives trades with a group of 14 European banks at the end of last year, European Union stress tests have revealed, leaving the banks to fund margin calls on as much as €13.8 billion of exposure. BNP Paribas alone had net derivatives exposure of €3.4 billion to Italy.

That is a potential source of systemic risk, critics claim, and is prompting calls for more sovereign counterparties to start posting collateral.

"We are talking about massive