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Opalesque Exclusive: Int’l law firm says more financial instruments suffer from increased counter party risk In a Briefing obtained by Opalesque, law firm Bingham McCutchen LLP says that financial counterparty risk is increasingly an issue and investors should understand the risks involved and prepare for potential fallouts: "In the current credit-constrained environment, financial institutions are increasingly concerned about the health of their financial counterparties. In today’s global age of derivative and other complex transactions, these counterparties include intermediaries of myriad types and structures.

It is by no means sufficient to understand the text of statutes that regulate broker-dealer insolvency or cross-border creditors’ rights procedures or US pre-packaged bankruptcy/DIP financing/plan confirmation. Among other reasons, relevant US bankruptcy laws alone are complex and may lead to members of the same corporate group proceeding under separate chapters, often creating unprecedented inter-estate interactions. There certainly are no cookie-cutter solutions.

Bingham says their lawyers were recently involved in a growing number of cases, like:

• investments in stressed Structured Investment Vehicles (SIVs), which are off-balance sheet “mini-banks,” often owned by banks, that borrow short and invest long, but outside the heavily regulated banking environment
• investments in Collateralized Debt Obligations (CDOs), which package deb......................

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