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Derivatives

Malaysian Bank Prepares Credit Debut

CIMB Group, Malaysia's largest investment bank with over MYR8.033 billion (USD2.114 billion) in assets, is gearing up to start structuring credit derivatives for the first time. "Credit derivatives are a nascent market in Malaysia, but we've been looking at it," said Lee K. Kwan, head of debt markets and derivatives in Kuala Lumpur. Lee said the bank plans to start offering credit-linked notes referenced to domestic names early next year and the move is driven by more firms becoming aware of the products. "There should be demand," he added.

CIMB Group will look to work with other domestic banks to remove credit risk from their balance sheets. "There's a real need for banks to spread out their credit risk," he added. CIMB already has an in-house structuring team that would be able to handle credit products. The team currently structures notes linked to a variety of interest rate products, including caps, floors and swaptions.

"It's a step forward in creating a market with greater product range and depth," said a fixed income head at an international house in Kuala Lumpur. He added that while it is good to see a domestic bank offering credit derivatives, it will take time before a real interbank credit derivatives market develops in Malaysia.

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