Bankers in Asia are getting ready to tap the Thai market for synthetic collateralized debt obligations on the back of regulatory changes. The Bank of Thailand has announced commercial banks may invest in synthetic CDOs rated BBB and higher, after they have implemented adequate internal risk controls. "We could see one or two deals this year, but as more banks come up the curve it will definitely pick up next year," said Aditya Bhugtiar, v.p. in structured credit sales at ABN AMRO in Singapore. "This really opens the door for synthetic CDOs," he added. Leon Hindle, v.p. in credit trading at Lehman Brothers in Hong Kong, said "There's definitely deals to be done."
Credit-linked notes and first-to-default baskets are already sold onshore in Thailand and CDOs are available offshore, but this is the first move to permit large portfolio CDO transactions locally, noted market officials.
Local banks are currently getting ready to invest in the products, establish systems and create independent risk management committees. Officials at Siam Commerical Bank in Bangkok confirmed the bank is now studying the product but declined to further elaborate. The bank has purchased CLNs as well as credit-default swaps (DW, 11/26/01). The move follows a regional trend of greater acceptance for credit products, as seen in Korea and Taiwan.
