Banks deterred from clearing derivatives under Fed proposal, CFTC members warn

20 February 2019 4:26pm
Banks would be discouraged from clearing derivatives under a US Federal Reserve proposal that seeks to improve the risk sensitivity of capital requirements, Republican and Democratic members of the US Commodity Futures Trading Commission said.

The four commissioners led by Chairman J. Christopher Giancarlo said that the Fed’s proposal for recalculating the exposure amount of derivatives contracts fails to include a margin clearing offset for large banks’ supplementary leverage ratio.

“Segregated margin is, by definition, risk reducing,” the letter released today said. The proposal “may further exacerbate the concentration of clearing members and thereby reduce access to clearing."