Ed Ivey quoted in American Banker article: Derivatives pose thorny problem for banks, regulators in resolution plans

Ed Ivey, MVA Head of Derivatives, was quoted in the American Banker article titled, “Derivatives pose thorny problem for banks, regulators in resolution plans” which was published June 25.

Edward Ivey, head of derivatives for the law firm Moore & Van Allen, said most large banks have "risk neutral books" of derivatives, meaning the various hedging positions they take on are offset and are profitable not because they beat the market but because they make incremental profit from the spread. But, he noted, they achieve this balance across a wide range of agreements and must manage it constantly.

Ivey said the recent findings from the Fed and FDIC show that regulators would like to see more granularity in resolution plans and explanations about how such interconnected portfolios could be pulled apart, rather than assuming they could be taken on wholesale by a bridge bank or acquirer.

"The regulators want to know they're putting thought into this, because it's about constantly improving the process — they want to know if there's some way to improve beyond just planning to transfer the whole book," Ivey said. "Regulators want to see some thoughtful analysis here, because they are also trying to find the best way to do this."

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