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‘Shed light on credit risk’

Dale: ‘There are still more than a dozen points requiring review and clarity’
Dale: ‘There are still more than a dozen points requiring review and clarity’

Investec head of intermediary sales for derivatives and structured products Gary Dale says the FSA needs to make a clearer distinction between counterparty and investment risk in its review of structured products.

At the Money Marketing structured products round table last week, Dale said that clarity was needed so the structured product market can move forward.

He said: “The IFA sector needs more clarity. From Lehmans, we have had the demise of various distributors, the FSA with various papers, templates and guidance.

“The British Bankers’ Association has been involved, feeding back to those comments and minutes have come out of meetings from last week and the week before without any real clarity.

“There are still more than a dozen points requiring review and clarity and I sympathise to a certain extent with the IFA industry.”

He went on to emphasise that investment risk would need to be dealt with separately to counterparty risk in the discussions.

He said: “The FSA has categorically said if the client does not accept any risk to capital, structured investment products, like notes, are bad.”
But Dale argued that structured products can de-risk a portfolio from an investment risk point of view.

“We said to the BBA, if you have got a client with £1m in equity funds/stocks and shares and your template suggests guidance of 25 per cent in structured investment plans by adding products that give an element of capital protection, whether there is a barrier or not, does this not by definition mean you reduce the risk of that portfolio?”

But he said the BBA does not accept this argument.

He said: “Their answer is no because there is no consideration made of counter-party/credit risk. This is where clarity needs to given and given quite quickly.”


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