ISDA marks its 40th anniversary with a focus on future challenges
The International Swaps and Derivatives Association (ISDA) is marking its 40th anniversary at a critical juncture, reflecting on its influential role in the global derivatives markets while prepping for a shifting future. The key figure leading this transition is Jeroen Krens, who has recently assumed the role of Chair of ISDA’s Board.
In a recent episode of The Swap, the official podcast hosted by ISDA’s Global Head of Communications & Strategy, Nick Sawyer, Krens shared insights with Scott O’Malia, CEO of ISDA, regarding his aspirations for the organisation and the defining challenges ahead for both ISDA and the markets it serves. Krens, who is also the Managing Director and Chief Operating Officer of the Markets and Securities Services division at HSBC, brings a wealth of experience to the role, having served on the ISDA board since November 2016, with a previous tenure from January 2012 to February 2014 at the Royal Bank of Scotland.
"My commitment to safe, efficient markets remains steadfast," Krens stated during the conversation, reinforcing ISDA’s foundational mission. He elaborated, saying, “There’s a lot of continuity… that’s kind of been the beacon that’s allowed us to be as successful as we have been today.” While he acknowledged the enduring core values of ISDA, Krens also expressed a clear awareness of the evolving dynamics of the regulatory environment. Notably, he emphasised the implications of changes surrounding Basel III and U.S. capital rules. “The Basel situation has evolved substantially over the last couple of months, and we’ll need to respond to that,” he explained.
Highlighting ISDA’s position, Krens articulated the importance of advocating for well-calibrated, risk-sensitive regulatory frameworks. He pointed out significant concerns regarding U.S. regulatory proposals that may deter market participants from engaging in central clearing, which is a critical component of post-crisis financial reforms. He mentioned a pertinent survey indicating that only 10 of 26 banks are making meaningful use of internal models, raising questions about the challenges firms face in adopting these frameworks.
Another subject discussed was the U.S. Securities and Exchange Commission (SEC)’s recent decision to delay mandatory clearing in the U.S. Treasury market for one year, a move which garnered ISDA's support alongside other trade associations. Krens clarified that the delay was not aimed at resisting reforms but rather at allowing adequate preparation time for this important shift.
Krens brought attention to the operational, legal, and capital consequences of newly introduced rules, emphasising the need for careful consideration in their implementation to avoid unintended effects on market participants. He welcomed recent comments from Federal Reserve Chair Jerome Powell concerning potential changes to the Supplemental Leverage Ratio (SLR), which he noted could help in encouraging engagement in the relatively safe U.S. Treasury market making.
Krens reiterated the significance of ISDA's digital agenda, an initiative he has championed even prior to his appointment as Chair. He identified several projects, including ISDA’s Digital Regulatory Reporting and ISDA Create, which are set to enhance the digital management of critical risk management notices.
Notably, ISDA is also dedicated to working in emerging markets, with Krens citing active developments in netting legislation, including recent advancements in Saudi Arabia. He underscored the importance of enforceability of netting while also contributing to the development of robust regulatory frameworks in these economies, as outlined in various white papers.
As part of its 40th anniversary celebrations, ISDA will release a comprehensive report that scrutinises the role of derivatives in risk mitigation, investment strategies, and enhancing market liquidity. Scheduled for launch during ISDA's Annual General Meeting in May in Amsterdam, the report has gathered insights from over 1,000 companies, revealing that a substantial 87.1% utilise over-the-counter (OTC) derivatives.
Reflecting on ISDA's accomplishments, Krens expressed a sense of pride while also recognising the importance of continued positive impact in the industry. He reminisced about his accidental entry into the field, recalling how a cancelled IT project turned into an unexpected journey into derivatives, eventually leading to significant achievements. Krens’ multifaceted interests outside of work, including field hockey, running, and family life in the English countryside, paint a picture of a leader who balances personal and professional pursuits while steering ISDA into its next chapter.