Global banks have until 2019 to swap collateral
(18 February 2013 – Global) Collateral requirement for banks trading uncleared swaps now have until 2019, after global financial regulators loosened requirements, with new rules designed to guard against a repeat of the 2008 credit crisis.
Banks including JPMorgan Chase and Deutsche Bank won the concessions in a revised proposal released on Sunday by the Basel Committee on Banking Supervision and International Organization of Securities Commissions (IOSCO).
The proposal would free up liquidity by exempting firms from having to transfer the first €50 million (A$65 million) of collateral, they said.
"Several features of the near-final proposal are intended to manage the liquidity impact of the margin requirements," IOSCO and the Basel panel said in a statement.
The changes would reduce to €700 billion from €1.7 trillion the total initial margin required to back uncleared swaps in the global market, they said.
The United States Federal Reserve and Bank of England are among more than 30 agencies responsible for the rules, which would start to take effect in 2015 and be fully in place by 2019. The proposal is open to public comment until 15 March.
Global regulators are seeking to align rules for the US$639 trillion (A$620 trillion) market for over-the-counter derivatives, which became a target for increased oversight after a credit crisis sparked by the 2008 collapse of Lehman Brothers Holdings Inc. and American International Group.
The potential for firms to exploit gaps in collateral rules for uncleared swaps between countries prompted regulators to strive for consensus.
The proposal would free up liquidity by exempting firms from having to transfer the first €50 million (A$65 million) of collateral, they said.
"Several features of the near-final proposal are intended to manage the liquidity impact of the margin requirements," IOSCO and the Basel panel said in a statement.
The changes would reduce to €700 billion from €1.7 trillion the total initial margin required to back uncleared swaps in the global market, they said.
The United States Federal Reserve and Bank of England are among more than 30 agencies responsible for the rules, which would start to take effect in 2015 and be fully in place by 2019. The proposal is open to public comment until 15 March.
Global regulators are seeking to align rules for the US$639 trillion (A$620 trillion) market for over-the-counter derivatives, which became a target for increased oversight after a credit crisis sparked by the 2008 collapse of Lehman Brothers Holdings Inc. and American International Group.
The potential for firms to exploit gaps in collateral rules for uncleared swaps between countries prompted regulators to strive for consensus.
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