Fitch CDx Survey: Sovereign and Regulatory Issues Top of Mind for Banks

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NEW YORK--(BUSINESS WIRE)-- Sovereign credit default swaps (CDS) use, market volatility and regulatory issues topped the list of the most surprising events in the Credit Derivatives (CDx) market, according to Fitch Ratings' Annual Credit Derivatives Survey.

Survey respondents cited unexpectedly high volumes and spread volatility among various sovereign names, particularly those of Western Europe, and the relative outperformance of the emerging markets. Respondents overwhelmingly named central clearing, regulation in general, and market liquidity as the top challenges for the CDx market.

A majority of respondents either 'supported' or 'strongly supported' central clearing of trades, the use of netting, and increased transparency. The majority of participants also had either a negative or undecided view on multiple clearing houses, the exchange trading of CDS, changing collateral requirements for end users, and the capital requirements for clearing members.

By a small majority, respondents now forecast the overall size of the CDx market to drop. In a sharp turnaround from last year's survey, more participants now expect single-name corporate CDS usage to decline (63% compared to 32% in 2009).

Fitch's eighth annual survey consisted of responses received over a three-month span from 26 banks in 12 countries.

The full 'Annual Credit Derivatives Survey' is available at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: Credit Derivatives Survey: Focus on Sovereigns and Regulatory Issues

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649777

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