Isda reports 75% increase in collateral use for derivatives trades

Collateral use in over-the-counter derivatives transactions and related margined activities such as repos and structured products increased 75% from $250 billion in 2001 to $437 billion this year, said the International Swaps and Derivatives Association today.

“The growth in collateral use demonstrates the commitment of derivatives dealers and end-users to effectively manage counterparty credit exposures,” said Robert Pickel, Isda's chief executive, in a statement.

But some ambiguity surrounded Isda’s latest figures, as the number of companies that took part in this year’s survey – 71 – is far more than the 43 that took part last year. The New York-based trade association was not immediately available for comment.

Isda said credit risk reduction continues as the most important reason for respondents using collateral, followed by regulatory capital savings. Access to more complex trades and the ability to price more competitively are also factors, said Isda.