(Reuters) - The world’s biggest banks have agreed to change rules that govern the $700 trillion derivatives market, the Financial Times reported on Tuesday.
Eighteen banks, ranging from Credit Suisse Group AG CSGN.VX to Goldman Sachs Group Inc (GS.N), have agreed to give up the right to “close out” deals on derivatives contracts if a financial institution runs into trouble, the newspaper said, citing people familiar with the matter.
The International Swaps and Derivatives Association (ISDA), the body leading the negotiations with regulators on behalf of the industry, said last month that a contractual solution for a temporary stay on derivatives “close outs” was progressing well.
When Lehman Brothers collapsed in September 2008, there was a rush to close derivatives contracts on the bank’s books, which caused chaos in the financial markets.
The agreement to change the protocols governing the derivatives market, which will take effect from Jan. 1, 2015, will be announced in the next few days, the Financial Times said.
Goldman Sachs spokesman Michael DuVally declined to comment on the issue.
Credit Suisse, another financial institution believed to be a part of the negotiations, was not available for comment.
The ISDA was unavailable for comment outside regular business hours.
Reporting by Sudarshan Varadhan; Editing by Ken Wills and Lisa Shumaker