Banking Department Approved Intercontinental Exchange, Inc. to Form Trust Company to Clear Credit Derivatives
ICE US Trust LLC will serve as a clearinghouse for credit default swaps
December 4, 2008
New York, NY: Richard H. Neiman, Superintendent of Banks and Chairman of the New York State Banking Board, announced today that the Board approved an application from Intercontinental-Exchange, Inc. (ICE) to create a New York-chartered trust company, ICE US Trust LLC, to serve as a central clearing facility for credit default swaps (CDSs).
“While reducing risk with respect to complex derivative products is an evolutionary process and will take some time to complete, I am proud of New York’s early involvement in shaping its future.” said Superintendent Neiman. “We have worked closely with our counterparts at the Federal Reserve Bank of New York in overseeing this industry initiative, to strengthen arrangements for clearing and settling CDSs and thereby reduce systemic risk.”
The existence of central counterparties for CDSs will mitigate counterparty default risk and decrease the notional amount of CDSs outstanding, estimated currently to be as large as $30-50 trillion.
Approval of the Articles of Organization of ICE US Trust LLC enables the company to take additional organizational steps, including raising capital (which is expected to come from its parent company). Upon completion of organizational steps and when certain other conditions have been met, the Superintendent will issue an authorization certificate to commence business.Approval of related applications is pending from the Federal Reserve.
The New York State Banking Department is the regulator for all state-chartered banking institutions, virtually all of the United States offices of international banking institutions, all of the State’s mortgage brokers, mortgage bankers, check cashers, money transmitters and budget planners. The aggregate assets of the depository institutions supervised by the Banking Department are more than $2.2 trillion.
In addition to regulating banking institutions, the Banking Department is active in informing and educating all New Yorkers on banking matters. To contact the Banking Department, please call 1-877-BANK-NYS or visit our Web site at www.banking.state.ny.us.