The Importance of Close-Out Netting

  • Close-out netting has reduced over-the-counter derivatives credit exposure by over 85%. Without the benefits of netting, banks worldwide might face a capital shortfall of over $500 billion.
  • Close-out netting is necessary because it enables derivatives participants to protect against adverse market changes following default of a counterparty.
  • Policy-makers have consistently supported the enforceability of close-out netting because it promotes financial system stability.
  • Current proposals designed to promote orderly resolution of failed financial institutions should be crafted carefully to avoid weakening the benefits of close-out netting.

Documents (1) for The Importance of Close-Out Netting

A Positive Step to Improve the FRTB in the EU

As the Basel III capital reforms are finalized for implementation in key jurisdictions, ISDA is maintaining a laser focus on making sure the rules are robust and risk-appropriate. Simply put, if capital requirements are set disproportionately high, this will have...