BOSTON – Deutsche Bank AG, Europe’s biggest bank, and FleetBoston Financial Corp. completed what they billed as “one of the largest derivatives deals in history,” following Fleet’s sale of its mortgage unit, Bloomberg News reported. After Fleet in June sold Fleet Mortgage Corp. to Washington Mutual Inc. with its bundle of mortgage loans, it no longer needed the derivatives it had arranged to hedge the risk associated with the portfolio. Instead of selling the derivatives — whose underlying securities are valued at about $40 billion — Fleet and Deutsche Bank worked to convert them into instruments that could hedge other liabilities that Fleet owns. For manufacturers, energy is more than just another operating expense. It plays a critical role… Fleet, the nation’s seventh-largest bank, is one of many banks turning to a growing market of credit derivatives, securities structured to take the risk of a loan default off a bank’s balance sheet in exchange for a stream of payments. Goldman, Sachs & Co. has estimated that the market, currently $1 trillion in size, may reach $10 trillion in the next five to seven years. The Deutsche Bank transaction for Fleet “could be among the record breakers,” said Meyrick Chapman, head of derivatives strategy at UBS Warburg in London. Fleet used swaps, options and other derivatives.
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FleetBoston completes deal with Deutsche Bank
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