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Mr. Scott said: "The thing that was important to us in this exit was to find a counterparty with an outstanding reputation and excellent financial strength.
Even now, some worry about structural changes in a counterparty with big positions in complex derivatives an estimated €10 trillion in notional principal in ABN's case.
The Journal reported that several firms regarded Bear as a potentially risky counterparty, with some clients going to far as to request that Goldman Sachs, Morgan Stanley and others serve as counterparties to Bear on several transactions.
Constellation Commodities is a counterparty with two Lehman Brothers subsidiaries that deal in commodities transactions.
It is highly relative that the counterparty with good credit is able to repay with enough financial strength.
This is justified for a counterparty with a high credit rating when the time to maturity is short.
Similar(49)
No one is sure who owns what, so investors are treating all counterparties with suspicion.
Since the Enron debacle, only counterparties with high credit ratings have been trusted.
"There is some value in treating counterparties with respect, in trying to build relationships with them, despite the distasteful nature if it," said Mr. Bader, the former Obama official.
Together with more formal mechanisms, these informal mechanisms can thus provide counterparties with the flexibility to incorporate new information, fill contractual gaps, and facilitate efficient ex post renegotiation.
Then the banks argue that they were simply counterparties, with no responsibility for the wisdom, or lack of same, shown by the customers.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com