Japanese banks and credit derivatives end users are starting to put collateral agreements in place, a move which market players expect will boost volumes. "In Japan, asking for collateral has been a pride issue," said Junichi Kamei, policy director and head of the Tokyo office at the International Swaps and Derivatives Association in Tokyo. Requiring collateral for derivatives had been seen as a lack of creditworthiness and therefore was regarded as evidence of a loss of face by many local players. However, as Japanese banks look to reduce their capital adequacy ratios they are now quietly pushing for collateral agreements. Such arrangements are also beneficial to end-users by allowing them to reduce their exposure to the banking sector, a lot of which is teetering on the brink of bankruptcy because of the number of non-performing loans.
ISDA recently held a seminar on the credit support annex to the Master Agreement which Kamei said was attended by over 300 participants. "We didn't expect so many participants to show interest--very quietly the tendency is developing steadily," he added.
