American Banker: Why Swaps May Save Banks' Bacon When Rates Rise
By Bob Newman
November 19, 2015
"In a Nov. 6 article for American Banker, John Heltman provided a comprehensive overview of the challenges banks will face when the Federal Open Market Committee finally raises short-term interest rates. In this article, Bob Newman, who oversees the financial institutions advisory practice at Chatham Financial and counsels institutions on interest rate hedging, responds ... 'But the article's mention of rising rates causing potential loan defaults by commercial borrowers, and the potentially costly unwind of related interest-rate swaps, tells only part... Read More...
In this FI Bulletin, we will touch on the factors that are commonly said to be the drivers of swap spreads, the factors that may have changed these dynamics in the recent past, as well as some of the potential implications for risk management strategies in the current environment.
What a few weeks we’ve just lived through in the financial markets, with no shortage of turbulence, turmoil, and downright tribulation across the world. The S&P 500 tumbled more than one hundred points last week, a dubious distinction it had not achieved since the grim days of October 2008 – as of this writing, it’s fallen more than fifty points in a single morning. China’s yuan (partially) and Kazakhstan’s tenge (entirely) shifted to a freely floating currency from central management, causing the former to fall materially and the latter to plummet precipitously. A barrel of crude oil cost 32% less than it did at the outset of July.
Against this backdrop of coordinated... Read More...
"Looking at the world post Volcker rule implementation, Luke Zubrod, Director of Risk and Regulatory Advisory at Chatham Financial, senses “the changes over the Volcker Rule have been happening over a period of time.” One big implication and change in the market this year has been liquidity and Zubrod admits 'liquidity picture of derivatives market is not pretty,” adding that “liquidity has diminished over the last year and has worsened over the summer.'” Read More
..."To help us tackle that, I’ve brought in the big guns. I’m joined today by Bob Newman with Chatham Financial. Bob is the Managing Director for Chatham’s financial institutions business, and one of THE go-to experts for banks looking to hedge interest rate risk.”Read & Listen More
iTreasurer: Kludgy Swap Market Still Safer than Pre-Crisis
By John Hintze, iTreasurer
May 15, 2015
"The consensus among Advisory Committee participants was that several factors have led to fewer FCMs, with new regulations playing a significant role. Luke Zubrod, director of risk and regulatory advisory at Chatham Financial, noted during the session that new regulations stemming from the Dodd-Frank Act as well as the Basel Committee have escalated costs for intermediaries and their clients, resulting in a less dynamic market.”
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“Luke Zubrod, director of risk and regulatory advisory at Chatham Financial, said that among the several aims of the new swap regulations was the intent to create incentives to clear swaps in order to reduce systemic risk in the derivatives market. He prefaced his comments about the drop in cleared swap volume by noting he would expect regulators to be more concerned if uncleared swap volume had increased more sharply. Nevertheless, he said, the decline in cleared swaps does likely raise questions for regulators."
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Introduction to Interest Rate Hedging for Financial Institutions
October 22, 2014 | Recording Available
Interest rate derivatives can be highly effective solutions for financial institutions seeking to manage interest rate risk from a balance sheet perspective, on a loan-by-loan basis, or both.
The first part of this webinar will cover the many benefits interest rate derivatives offer financial institutions and how best to incorporate derivatives and hedge accounting into an ALM strategy. Next, we will discuss the two most popular methods for hedging interest rate risk at the loan level: borrower back-to-back swaps and the hedging... Read More...