OTC MARKET NEWS Powered By Quantifi

Wall Street May Save Billions on Swaps in Regulator Squabble 

June 26, 2015

Jesse Hamilton, Silla Brush, Bloomberg Business

A quarrel among regulators could add up to billions in savings for Wall Street banks.

At stake is a proposed rule that has dragged on for years that could require firms like JPMorgan Chase & Co. and Morgan Stanley to set aside tens of billions of dollars in collateral when trading swaps with their own affiliates. Now, a last-ditch effort by bank lobbyists has helped spur some regulators to second-guess how strict they should be, according to three people familiar with the discussions.

The Office of the Comptroller of the Currency, which regulates some of the largest banks that deal in swaps, is leaning toward insisting only an affiliate post collateral to the bank, said the people, who requested anonymity because the final rule isn’t yet public. The Federal Deposit Insurance Corp. has backed a version of the rule proposed in September, demanding both a bank and its affiliate put up collateral, the people said.

Swaps trading -- when it was largely unregulated -- amplified the financial crisis seven years ago. An aggressive collateral rule would help prevent affiliates from collapsing and leaving taxpayers on the hook, Thomas Hoenig, vice chairman of the FDIC, said in an interview. Banks also are hiding behind the complexity of the rule to say it puts them at a competitive disadvantage with foreign rivals, he said.

Read more: Bloomberg Business

Comments are closed on this post.


Submit your email to receive our newsletter