LCH.Clearnet’s SwapClear clears interest rate swaps for Danske Bank

-- SwapClear membership reaches 57 --

London, 17 August 2011

Danske Bank (DBS) (Danske Bank) has successfully commenced clearing its interest rate swap (IRS) business through SwapClear, LCH.Clearnet Ltd’s (LCH.Clearnet) market leading over-the-counter (OTC) IRS clearing offering, becoming the first Nordic bank to join the service. The total number of members clearing through SwapClear now stands at 57.

Danske Bank Group is the largest financial enterprise in Denmark and one of the largest in the Nordic region. The Group offers its customers a wide range of services in the field of banking, mortgage finance, insurance, leasing, real-estate brokerage and asset management. Danske Bank’s considerable capital strength enables it to both expand its business universe and adapt existing activities in a competitive market environment.

Jens Peter Leschly Neergaard, Global Head of Financial Markets, Danske Bank commented, “Clearing IRS trades greatly improves transparency, capital efficiencies and reduces counterparty risk. As a leading bank in IRS trading for the Nordic currencies as well as the EUR, we are committed to providing a safer trading environment; SwapClear was the natural choice to support this.”

Michael Davie, CEO of SwapClear said, “We’re very pleased to welcome the first Nordic bank to SwapClear. Danske Bank can now enjoy the significant benefits that clearing brings ahead of the regulatory changes. We believe that this move by Danske Bank will lead other banks in the Nordic region to join us and gain access to our unrivalled risk management and clearing expertise.”

Established nearly 12 years ago, SwapClear is the only truly global clearing service for IRS. Since launch in 1999, it has cleared over 1.6 million OTC IRS trades. SwapClear currently has 57 clearing members and its portfolio contains 950,000 trades with a notional value in excess of $300 trillion. A further $66 trillion of cleared transactions were removed through multilateral trade compression. SwapClear is the only OTC clearing service to have successfully handled a significant OTC default, when it resolved Lehman Brothers’ $9 trillion IRS default in 2008. In that instance, SwapClear’s default management process ensured that more than 66,000 trades in 5 currencies were hedged and auctioned to other clearing members. SwapClear’s process resulted in no loss to any market participants.

In June 2010, following extensive industry consultation, LCH.Clearnet became the first derivatives clearinghouse in the world to use overnight index swap (OIS) rate curves to discount IRS. This important step not only ensured the highest standards of risk management within a CCP; it has also increased certainty and transparency in the interest rate swap market more generally. This type of industry thought leadership was recognised by Risk Magazine in naming LCH.Clearnet 2011 Clearing House of the Year in its Risk Awards. 

- Ends -

To view the press release as a pdf click here.

About LCH.Clearnet

LCH.Clearnet is the leading independent clearing house group, serving major international exchanges and platforms, as well as a range of OTC markets.  It clears a broad range of asset classes including: securities, exchange traded derivatives, energy, freight, interbank interest rate swaps and euro and sterling denominated bonds and repos; and  works closely with market participants and exchanges to identify and develop clearing services for new asset classes.

A clearing house sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade.  When the trade is registered with a clearing house, it becomes the legal counterparty to the trade, ensuring the financial performance; if one of the parties fails, the clearing house steps in.  By assuming the counterparty risk, the clearing house underpins many important financial markets, facilitating trading and increasing confidence within the market.

Initial and variation margin (or collateral) is collected from clearing members; should they fail, this margin is used to fulfill their obligations.  The amount of margin is decided by the clearing house’s highly experienced risk management teams, who assess a member’s positions and market risk on a daily basis.  Both the soundness of the risk management approach and the resilience of its systems have been proven in recent times.

LCH.Clearnet is regulated or overseen by the national securities regulator and/or central bank in each jurisdiction from which it operates.