Search
 

Proposed Swaps Margin Requirements Would Boost Risk, ISDA Argues

Financial burden on banks could mean less hedging by corporates. (Jiro Okochi of Reval)

By John Hintze | Updated on December 04, 2012
Tom Deas of FMC and NACTSwaps counterparties, including corporate end users, would face increased risks under banking regulators’ swaps margin proposal, according to a study by the International Swaps and Derivatives Association (ISDA).

Global regulators have recommended requiring initial and variation margin on derivatives trades from all financial institutions and systemically important non-financial firms, while exempting other non-financial end users. The rules are still in the works and there is concern they may vary from U.S. regulations, presenting global companies with two sets of initial margin requirements.

The ISDA study does not directly address the impact of proposed margin requirements on end users, whose trades make up 10% or less of the over-the-counter derivatives market. However, it calculates that the largest global banks would each have to pony up between $23 billion and $49 billion of initial margin on average, money that would be unavailable for other purposes.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Recommended Stories

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2024 ALM Global, LLC. All Rights Reserved.