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Thursday April 14, 06:20
Bank’s ability to perform in FX market in direct proportion to credit relationships
(by Olivia Cohen)

Bank’s ability to perform in FX market in direct proportion to credit relationships A survey taken by consulting firm Greenwich Associates reveals that the ability of banks to win foreign exchange and derivatives business is in direct proportion to the size of their credit business. About two thirds of questioned forex users and about three-quarters of those interest rate derivatives users were only choosing to do business with the banks that extended loans to them.

The findings highlight a potential problem for the purer investment banks, such as, in trying to gain market share since they do not have the credit relationships of the global financial services organisations. At the moment banks who lead in the lending market, including Citigroup, Deutsche Bank and UBS, have the largest share of the forex market worth $1,900 billion a day.

“For dealers, credit demands dictate that foreign exchange and interest rate derivatives trading will remain a two-tiered game.” said Robert Statius-Muller, analyst at Greenwich.



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