In January 2019, BofA completed a transfer of autocallable risk from Natixis. Market sources say the transfer totalled $2 billion notional, though BofA declined to comment on size. A month earlier, the French dealer had revealed a €260 million loss on Korean equity-linked notes and was seeking to cut its exposure. BofA found itself with spare capacity, having dialled down its own share of the $58 billion Korean structured product market from 6% at the start of 2018 to just 2% by year-end.
“We had shrunk exposure a lot at the end of 2018,” says Souli. “Internally we decided those products weren’t correctly priced when embedding all of the risk. So, when we saw a competitor coming out of that business, we were ready to benefit from pricing taking into account the risk embedded, so we positioned in the right manner and refilled our book.”
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