Bank CDSs straining under TLAC

UK and Swiss bank Opco CDSs losing relevance as a hedging tool, experts warn

On the move: dealers are shifting bonds from their operating companies to holding companies

International bail-in buffer requirements have triggered a shift in the way UK and Swiss banks manage their debt, with dealers shifting bonds from their operating companies (Opco) to holding companies (Holdco).

But as the bonds issued from the Opco deplete and eventually disappear, market participants say this will have a knock-on effect on the credit default swap (CDS) market, as the most liquid CDS contracts on these names continue to reference Opco debt that may no longer exist in the near