Banks Balk at Compensation for 'Big Bang' Rate Losses
- EU rate reform wiped millions from some swaption portfolios
- U.S. lenders are facing similar upheaval with SOFR in the fall
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JPMorgan Chase & Co., Deutsche Bank AG and Nomura Holdings Inc. are among banks telling clients they won’t compensate them for trades that lose value during the “big bang” transition sweeping through Europe’s interest-rate derivatives market.
Banco Santander SA and BNP Paribas SA also won’t reimburse for losses on so-called swaption trades caused by a change in how the industry prices these deals, according to people familiar with the matter who asked not to be named discussing private information. Swaptions are derivatives that give the owner the right to buy an interest-rate swap in the future.