In the 1970s, the dark ages of regulatory excess, globalization was impeded by
tough restrictions imposed by governments on outflows from their capital
markets. U.S. and U.K. companies got around some of these restrictions by
devising parallel loan agreements whereby U.S. companies funded subsidiaries of
U.K. companies in the United States and U.K. companies funded subsidiaries of
U.S. companies in the United Kingdom. Thus, cross-border transfers were avoided.
But these arrangements were complex and subject to legal haggling. In 1976, the
swap emerged as a much simpler solution to the problem, and its popularity has
grown ever since as more and more uses have been found for this predominant
derivative.