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Banking, Antitrust and Derivatives: Untying the Antitying Restrictions


Christian A. Johnson


University of Utah College of Law


Buffalo Law Review, Vol. 49, pp. 1-56, 2001

Abstract:     
This article argues that expressly requiring a borrower to enter into an OTC derivative with a bank as a condition for receiving credit does not violate the antitying restrictions of the Bank Holding Company Act ("BHCA"). Part I of this article discusses the nature of OTC derivatives and demonstrates through examples how OTC derivatives can enable a borrower to minimize various business risks. Part II examines how banks are encouraging their borrowers to utilize various risk management techniques such as OTC derivatives and discusses the impact of BHCA on such efforts. Finally, Part III analyzes the elements of tying a claim under BHCA and argues that a requirement to enter into an OTC derivative with a bank as a condition to obtaining credit will not constitute a violation of the BHCA. Part III first discusses how a loan combined with an OTC derivative such as an interest rate swap is not really two tied products, but is actually in substance a fixed rate loan. The part then argues that these tied products do not satisfy the "anticompetitive in nature" requirement because typically only the lending bank is willing to enter into the OTC derivative with the borrower. Finally, the part concludes that the traditional banking practice exception to the antitying rules would exempt such tying arrangement from the antitying provisions.

Number of Pages in PDF File: 56

Keywords: OTC Derivative, Antitying, Tying, Bank Holding Company Act, BHCA, Anticompetitive in Nature, Risk Management, Business Risks, Interest Rate Swap, Banks, Banking

JEL Classification: G2, G21, G28, G29

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Date posted: March 29, 2006  

Suggested Citation

Johnson, Christian A., Banking, Antitrust and Derivatives: Untying the Antitying Restrictions. Buffalo Law Review, Vol. 49, pp. 1-56, 2001. Available at SSRN: http://ssrn.com/abstract=607865

Contact Information

Christian A. Johnson (Contact Author)
University of Utah College of Law ( email )
332 S. 1400 East Front
Salt Lake City, UT 84112-0730
United States

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