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Fed backs off corporate margin requirements 

September 5, 2014
Mike Kentz, IFR

The Federal Reserve has scaled back an original proposal to require US corporates to back their uncleared OTC swaps with high-grade collateral, a major retrenchment that participants expect will significantly reduce corporate hedging costs when compared to the original proposal back in 2011.

The change, announced on Wednesday, came as a part of a proposal approved by the Fed which, when codified, will require banks to post and collect margin against proprietary and client uncleared swaps trades.

The long-awaited proposal is intended to protect against systemic risk by increasing collateral reserves on the generally more risky and customised over-the-counter transactions. The push towards the clearing and margining of OTC swaps was a major tenet of the 2009 G-20 regulatory agreement.

Read more: International Financing Review


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