Hedging alternatives eyed

JPM said to be exploring alternative risk transfer structures

JP Morgan is believed to be exploring alternative risk transfer structures given the persisting uncertainty in the US around the regulatory treatment of synthetic securitisations. However, market sources believe that the impasse is expected to be resolved this year amid the incorporation of Basel IV into the US regulatory framework.

According to sources, the US lender is exploring CDS and SPV structures as alternative wrappers to the CLN format as well as old school cash structures such as the one that was executed by Customers Bank last year (SCI 12 October 2022).

US regulators raised issues about the direct CLN structure in 2022 (SCI 19 August 2022), but the same sources qualify without detail that the discussions are technical in nature and can be resolved through simple contractual changes.

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