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Pimco Urges Basel to Fix Rules Before Swaps Market Disruption 

April 20, 2015

Matthew Leising, Bloomberg Business

Pacific Investment Management Co. is urging regulators to rethink bank-capital requirements because they threaten market stability.

The capital requirements in question were released last year by the Basel Committee on Banking Supervision. Banks hold collateral from their customers in derivatives trades that are backed by clearinghouses to protect against losses. The regulators, however, didn’t allow this margin to be treated as a buffer that reduces a bank’s overall risk.

“Should these rules not change, in our view the cost of transacting in the markets will continue to increase and risks will become more concentrated in the hands of fewer market participants, creating a more interlinked and fragile market system that is more vulnerable to dislocations,” Pimco executives Libby Cantrill, William De Leon, Tracey Jordal and Courtney Walker wrote in a paper published yesterday. The firm manages $1.59 trillion.

Read more: Bloomberg Business

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