Two recent ISDA surveys highlight the continuing importance of OTC derivatives and the overwhelming percentage of uncleared transactions now subject to collateral agreements (90 percent). This was not always the case. As International Treasurer highlighted in its May 2, 1994 issue, the G30, in an appendix Survey of Industry Practices following its Derivatives: Practices and Principles report, found that as much as 40 percent of the respondents said they planned not to accept credit enhancements or collateral and 62 percent said they planned to provide none.
A contrasting perspective was offered in that same May 2, 1994 issue of International Treasurer by two derivatives-specialist lawyers from Rogers & Wells. Based on a growing realization for the need to manage counterparty/credit risk, they provided our end-user readers with a practical how-to on setting up bilateral collateral agreements with their broker/dealers. Much of it is still relevant today, including the reluctance on the part of corporate end-users to fully consider the implications of becoming secured lenders.