BBH LAUNCHES CENTRAL SETTLEMENT FOR BUY-SIDE CDS PAYMENTS

Posted June 2, 2009

BOSTON – Brown Brothers Harriman (BBH) has launched central settlement of credit default swap payments for clients. Central settlement is designed to reduce settlement risk for asset managers by replacing manually processed bilateral payments with automated netted cash flows per account, per currency.

Financial regulators in the US and Europe have actively encouraged the financial services industry to increase the level of automation for the processing of credit derivatives in order to reduce systemic risk, specifically targeting manual payment processing, reconciliation and counterparty risk management. The Depository Trust & Clearing Corporation (DTCC) and CLS Bank International launched a central settlement service for OTC credit derivative transactions, which launched in November 2007. Several buy-side institutions had targeted implementation by the end of May 2009. BBH’s launch is one of the first implementations of the central settlement solution for the buy side.

“BBH is excited to support this initiative to help our clients better manage their counterparty risk,” says Cherie Graham, Senior Vice President and Head of BBH’s Derivative Product Group. “BBH has been actively partnering with many of the most sophisticated asset managers to solve operational challenges associated with increased investment in complex OTC derivatives.”