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Banks Wary of Clearing Derivatives for Pension Funds (Risk.net)

Fund managers and banks look to Labor Dept. for guidance on whether collateral would be treated as plan assets.

U.S. corporate pension funds are finding that banks are reluctant to accept them as clearing clients for fear ERISA would treat collateral posted on their futures trades as assets of the pension plan if the plan filed for bankruptcy, according to Risk.net. The pension plans are trying to line up clearing for over-the-counter derivatives trades, but the banks fear the margin the pension funds post on those trades could be clawed back in the case of bankruptcy.

The article says the Securities Industry and Financial Markets Association has requested guidance from the Department of Labor on this point.

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