Currency swaps range the gamut from _extremely_ short period swaps (read hours to days) to very long period swaps (I've never heard of one bigger than 5 years but they may exist).
The short period swaps are almost pure liquidity imbalance mitigation techniques. It's cheaper and less risky to do than the equivalent bridge loan plus fx transaction. In these cases the notional really is fully owed on a future leg, but a) its a really small number and b) the counterparty risk is miniscule. These happen a lot. Large treasury groups may be making hundreds of swaps a day if they have lots of multi-currency cash flows, so the notionals can add up even though the actual dollar amounts per swap are small.
The longer period swaps I have a lot less expertise in, but in my experience they are modeled like CDS' and your premise is right. The notional largely doesn't matter as its the cash flow that is at risk.
As far as I know, in _neither_ case do people write the legs as 'debt'.
I’d note too the issue the BIS has is with the amount of notional in off clearing house deals. I would expect long dates swaps would benefit from standardization and clearing, but that it’s too expensive and tedious to do cleared deals on short dated instruments. Does that map with your intuition?
Sounds right, but i have so little experience with long dated swaps that I'm hesitant to say. Even a ~year long swap feels very strange to me as someone coming from the much more short dated world.
Thats actually my biggest gripe about the report, they are treating the whole market as monolithic when its anything but.
The short period swaps are almost pure liquidity imbalance mitigation techniques. It's cheaper and less risky to do than the equivalent bridge loan plus fx transaction. In these cases the notional really is fully owed on a future leg, but a) its a really small number and b) the counterparty risk is miniscule. These happen a lot. Large treasury groups may be making hundreds of swaps a day if they have lots of multi-currency cash flows, so the notionals can add up even though the actual dollar amounts per swap are small.
The longer period swaps I have a lot less expertise in, but in my experience they are modeled like CDS' and your premise is right. The notional largely doesn't matter as its the cash flow that is at risk.
As far as I know, in _neither_ case do people write the legs as 'debt'.