Asian banks face hedging threat

Sheehan said higher risk weightings of up to 150% for low-rated credits, under the standardised approach to finding a credit risk capital charge, may mean a number of global banks will cease dealing with Asia's smaller banks. "I think it is important to realise that most of the derivative hedging trades done in these small markets, such as Thailand, have the global banks as counterparties," says Sheehan. "And under the 150% risk weighting system, it's going to be an extraordinary bank that