Bankers Trust Co. is selling its risk-management skills to other participants in the over-the-counter derivatives market.
The company is making available its C-Trac+ system, which helps manage collateral pledged by a counterparty in a derivatives trade, such as a swap or forward contract.
Bankers Trust, one of the largest participants in the derivatives market, has been using the system for four years.
"Collateral has been taking off as a risk-management tool," said Thomas F. Wiese, a Bankers Trust vice president. The value of collateral in the over-the-counter derivatives market -- primarily government agency bonds and government securities -- exceeds $ 1 0 billion, according to Bankers Trust.
Fending Off Regulatory Intervention
The bank announced its program for monitoring counterparty collateral just days after an international group of banks -- known as the Group of Thirty -- released recommendations to help derivative-market participants better manage real and potential risks.
The report was seen as an attempt to fend off regulatory intervention in the unregulated over-the-counter derivatives market.
Bankers Trust officials said that C-Trac+ should help banks implement some of the recommendations.
"Every top manager is worrying about how to implement and how to handle collateral or accumulate it," said Eileen Bedell, a managing director at Bankers Trust who markets the company's trading systems.
When a C-Trac+ user enters into a collaterized derivative transaction, the system tracks counterparty exposure, revalues the collateral periodically, nets collateral obligations by counterparty, and acts as custodian for the assets used as collateral.
