Portman Building Society, the fourth largest thrift in the U.K. with assets of nearly GBP10 billion (USD15.6 billion), is considering using credit derivatives for the first time. David Stunell, group treasurer in Bournemouth, U.K., said credit derivatives protection is an attractive option in light of deteriorating credit quality in its investment portfolio, which includes government and corporate bonds. In line with many of the U.K.'s largest thrifts, Portman marks its investments to market and therefore sees credit derivatives as a means for hedging out volatility in its earnings statement from unrealized losses.
However, the decision on whether Portman will use credit derivatives may yet be some time off, with a number of regulatory requirements also needing to be met before any action could be taken, noted Stunell. The firm is also planning to hire a head of credit risk, an appointment it is expected to make before it proceeds. Stunell declined comment on whether the firm is talking to derivatives houses about its plans.
The U.K. Building Societies Act was amended to allow thrifts to use credit derivatives in June last year.
