Managing the CREDIT RISK associated with a position in an instrument such as an interest rate swap requires credit evaluation skills of the type commonly associated with BANK lending. Thus, as the swaps market evolved into a dealer market where financial intermediaries assumed the ROLE of counterparty to the end users of swap agreements, COMMERCIAL banks, which have traditionally specialized in credit risk evaluation and have the capital reserves necessary to support credit risk management, came to dominate the market for swaps and other OTC derivatives.

Managing the credit risk associated with a position in an instrument such as an interest rate swap requires credit evaluation skills of the type commonly associated with bank lending. Thus, as the swaps market evolved into a dealer market where financial intermediaries assumed the role of counterparty to the end users of swap agreements, commercial banks, which have traditionally specialized in credit risk evaluation and have the capital reserves necessary to support credit risk management, came to dominate the market for swaps and other OTC derivatives.