“IS INDIA READY FOR CREDIT DEFAULT SWAPS
“IS INDIA READY FOR CREDIT DEFAULT SWAPS?”
II
Index
1. Executive Summary
1
2. Introduction
2
3. Positive Implications of the Introduction of CDS
4
4. Negative Implications of the Introduction of CDS
6
5. Issues Demanding Urgent Attention
8
6. Conclusion
10
7. Bibliography
11
Is India ready for credit default swaps?
1
Executive Summary
“…..bankers are in the business of managing risk, pure and simple, that is the business of banking.”
- Walter Wriston,
Former CEO, Citibank
With India having grown at an average of 8.6% in the past 4 years, there has been an excessive demand for capital from all sorts of businesses to further fuel their growth.
Banks seek to address this need for capital and in turn assume risk. But for India to continue to grow at over 9% it’s an imperative that we have healthy financial institutions which are able to manage their risks well. Credit derivatives which emerged globally nearly a decade ago and created a rage as effective tools for credit risk management are set to make their debut in India to help banks better manage their credit risks.
This paper seeks to address the immense relevance of credit derivatives, particularly
CDS, in the Indian context. The introduction shall provide an overview of the significant features of the recent guidelines on the introduction of CDS. The author is rather optimistic in his view of the future course of development of the Indian credit derivatives market. In keeping with this view, the paper highlights the positive/negative implications of the introduction of CDS and the issues that may emerge as the market gains scale. The paper shall also endeavor to identify issues which demand urgent attention of the regulators to ensure the healthy growth of credit derivatives in India.
Is India ready for credit default swaps?
2
Introduction
“ISDA Mid-Year 2007 Market Survey: Credit Derivatives at $45.46 Trillion”
- Notional
II
Index
1. Executive Summary
1
2. Introduction
2
3. Positive Implications of the Introduction of CDS
4
4. Negative Implications of the Introduction of CDS
6
5. Issues Demanding Urgent Attention
8
6. Conclusion
10
7. Bibliography
11
Is India ready for credit default swaps?
1
Executive Summary
“…..bankers are in the business of managing risk, pure and simple, that is the business of banking.”
- Walter Wriston,
Former CEO, Citibank
With India having grown at an average of 8.6% in the past 4 years, there has been an excessive demand for capital from all sorts of businesses to further fuel their growth.
Banks seek to address this need for capital and in turn assume risk. But for India to continue to grow at over 9% it’s an imperative that we have healthy financial institutions which are able to manage their risks well. Credit derivatives which emerged globally nearly a decade ago and created a rage as effective tools for credit risk management are set to make their debut in India to help banks better manage their credit risks.
This paper seeks to address the immense relevance of credit derivatives, particularly
CDS, in the Indian context. The introduction shall provide an overview of the significant features of the recent guidelines on the introduction of CDS. The author is rather optimistic in his view of the future course of development of the Indian credit derivatives market. In keeping with this view, the paper highlights the positive/negative implications of the introduction of CDS and the issues that may emerge as the market gains scale. The paper shall also endeavor to identify issues which demand urgent attention of the regulators to ensure the healthy growth of credit derivatives in India.
Is India ready for credit default swaps?
2
Introduction
“ISDA Mid-Year 2007 Market Survey: Credit Derivatives at $45.46 Trillion”
- Notional
Bibliography: 11. Ministry of Finance – Department of Economic Affairs (December 2005).