At a time when many small banks could potentially benefit from greater access to methods that might help them manage the risk that they will be affected by increases in interest rates, one firm has stepped up and started providing these lending institutions with OTC derivatives.
B&F Capital Markets is a company that has developed these off-exchange financial instruments for various small lenders including the Birmingham, Alabama-based Cadence Bank, according to American Banker. B&F has helped its clients hedge the risk of short-term interest rate increases through the use of OTC caps. The company has targeted smaller financial institutions since the larger ones are frequently capable of creating their own securities for derivatives risk management.
In addition to providing the creation of these financial instruments, B&F has also started offering clients advisory services on how to comply with derivatives regulations contained in the Dodd-Frank Act, the media outlet reported.
The providing of these services illustrates the challenges that market participants have been encountering as they seek to navigate a regulatory environment for derivatives that is highly intricate, but also suffers from uncertainty in some areas. Certain aspects of the Dodd-Frank Act have been challenged in court, and further legal efforts could serve to make the framework of rules and regulations for derivatives even more uncertain.