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Credit Default Swaps

House of Lords written question – answered on 7th July 2011.

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Photo of Lord Myners Lord Myners Labour

To ask Her Majesty's Government whether they or the Bank of England or the Financial Services Authority have reliable current data on the gross exposure of British banks to sovereign debt default swaps written on Greek credits; and whether they will publish the aggregate value.

To ask Her Majesty's Government whether the process for the determination of an event of default is sufficiently objective and clear for reliance to be placed on credit default swaps.

Photo of Lord Sassoon Lord Sassoon The Commercial Secretary to the Treasury

Data on exposures of British banks to the Greek sovereign for the first quarter of 2011, including derivatives and credit commitments, are available on the Bank of England website at: http://www. bankofengland. co.uk/statistics/Bankstats/2011/Jun/TabC4.2.x Is.

These data form the basis of exposures reported in Bank for International Settlements statistics. The definitions of derivatives and credit commitments, which include credit default swaps (CDS), are set out in the following guidance: http://www.bankofengland. co.uk/mfsd/iadb/notesiadb/consolidated_foreign_ claims.htm.

Additionally, the Depository Trust and Clearing Corporation website publishes some data on CDS holdings: http://www.dtcc.com/.

A decision on whether or not an event should trigger credit default swap payments is made by a Credit Derivatives Determinations Committee and is governed by the Determinations Committees Rules. The International Swaps and Derivatives Association (ISDA) acts as a non-voting secretary to each Determinations Committee and co-ordinates the decision-making process.

Information on how the Determinations Committees and ISDA operate can be found at the ISDA website: http://www2.isda.org/. This website also provides a listing of the issues submitted to the Determinations Committees.

HM Treasury does not comment on the way in which the Determinations Committees and ISDA operate.

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