Five banks have joined forces to create a hedging tool designed to strengthen their balance sheets and protect them against market sell-offs as international regulations force institutions to increase the quality of their assets.
Barclays Capital, HSBC, Lloyds, Nomura and UBS will launch a market in derivatives – overseen by the Wholesale Markets Brokers’ Association – aimed at reducing funding costs and boosting profits in the sterling markets.
The derivatives, which will be used to offset the risks of holding UK government bonds or short-term loans, will start trading on April 17 and will enable banks to lock in their cost of funding from a week to a year.
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