'Credit Default Swaps': Gateway to a New World of Opportunities and Legal Risks

Company Law Journal, Vol. 3, p. 57, 2008

17 Pages Posted: 14 Jul 2008 Last revised: 3 Nov 2008

See all articles by Raghav Sharma

Raghav Sharma

National Law University Jodhpur (NLUJ)

Siddhartha Shukla

National Law University Jodhpur (NLUJ)

Date Written: January 1, 2008

Abstract

Credit Risk Management has acquired a pivotal place in the Indian banking system as the banks are adopting globally accepted Basel II standards. In order to resolve the growing anxiety over credit risks, the RBI is now seeking to arm the banks with new financial tools to transfer these risks from their balance sheets on the lines of such international developments. Thus, the RBI, on May 16, 2007, released the Draft Guidelines on Credit Default Swaps, proposing a regulatory framework for such transactions.

This research paper aims to explore the concept of Credit Default Swaps and identify their crucial advantages for the Indian banking system. The structure of the paper is as illustrated:

I). PROLOGUE II). DEMYSTIFYING CREDIT DEFAULT SWAPS III). WILL CDS OPEN NEW VISTAS FOR THE BANKING SYSTEM? IV). LEGAL VULNERABILITY AND SUGGESTIONS A). Jurisdictional Conflict: Working Group v. Draft Guidelines B). Documentational Anomalies C). Re-Characterizing CDS as 'Insurance Contract' D). Fiduciary Duty of the Board of Directors vis-a-vis CDS E). The Peril of Insider Tipping V). CONCLUSION

Keywords: Credit, Default, Swaps, Banking, Risk, Financial System, India, Insurance, RBI

Suggested Citation

Sharma, Raghav and Shukla, Siddhartha, 'Credit Default Swaps': Gateway to a New World of Opportunities and Legal Risks (January 1, 2008). Company Law Journal, Vol. 3, p. 57, 2008, Available at SSRN: https://ssrn.com/abstract=1159511

Raghav Sharma (Contact Author)

National Law University Jodhpur (NLUJ) ( email )

NH-65, Nagour Road
Kamala Nehru Nagar, Jodhpur
Mandore, Jodhpur, Rajasthan 34230
India

Siddhartha Shukla

National Law University Jodhpur (NLUJ) ( email )

NH-65, Nagour Road
Kamala Nehru Nagar, Jodhpur
Mandore, Jodhpur, Rajasthan 34230
India

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