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Nomura latest bank to leave clearing swaps business

Nomura latest bank to leave clearing swaps business

(14 May 2015 – Japan)  Nomura Holdings Inc is the latest bank to exit the clearing swaps-business following further rules that increase risks and costs in the US$630 trillion (A$789 trillion) market.

“Due to the evolving and uncertain regulatory and market environment,” Nomura will no longer offer its clients the option of clearing swap trades in the U.S. and Europe, Rob Davies, a spokesman for the Tokyo-based firm, said in an e-mailed statement 12 May.

“Our focus is to continue growing our execution business” in both private swaps and listed derivatives around the world, he said.

Other banks that have left the market include State Street Corp, Royal Bank of Scotland Plc and Bank of New York Mellon Corp.

Under the Basel Committee on Banking Supervision, capital rules have made it more expensive for the world’s largest banks to act as clearing brokers.

Bank act as gatekeepers tot eh client business they bring to the service, acting as a financial backbone for derivatives clearing houses, hey ensure margins are paid and contribute their own funds to a reserve that is used in case of a large default.

With some banks pulling out of the business, this leaves those remaining firms responsible to face a more concentrated risk for the trades they bring to clearing houses.

Nomura’s client collateral was not large, holding US$28.6 million in client collateral at the end of 30 April.

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