The International Swaps and Derivatives Association is reviewing definitions governing credit default swaps because of an impasse over Aiful Corp. swaps. At issue is whether Japan's alternative dispute-resolution process qualifies as a credit event that would lead to payouts on swaps. "If ISDA clarifies that going into ADR constitutes a credit event, that would make it much easier for credit default swap buyers to trigger credit events," said Junichi Shimizu, a credit analyst at Deutsche Bank. One expert says failure to reach an agreement quickly could damage confidence in Japan's market for the contracts.
Published in Brief: