Pension funds and other 'non-bank' financial firms have more than $80 trillion of hidden, off-balance sheet dollar debt in FX swaps, the Bank for International Settlements (BIS) said. Its main warning concerned what it described as the FX swap debt "blind spot" that risked leaving policymakers in a "fog". FX swap markets, where for example a Dutch pension fund or Japanese insurer borrows dollars and lends euro or yen before later repaying them, have a history of problems. It has grown from just over $55 trillion a decade ago, while the churn of FX swap deals was almost $5 trillion a day in April, two thirds of daily global FX turnover. For both non-U.S. banks and non-U.S. 'non-banks' such as pension funds, dollar obligations from FX swaps are now double their on-balance sheet dollar debt, it estimated.

Source: News 24 December 06, 2022 01:16 UTC