The unintended consequences of the UFR

Over the past six months, Dutch pension reform has had an impact on the shape of the interest rate swap curve from the 15-year point onwards. With a compromise solution now on the table, traders say some certainty should return – but what does it mean for the long end of the curve? By Lukas Becker

Bankers have been muttering darkly about the unintended consequences of new regulation for some time. A requirement to clear over-the-counter derivatives trades, combined with new rules on bank capital and liquidity, will have far-reaching consequences that some regulators may not have initially considered, they claim – from a squeeze on high-quality collateral to a reduction in corporate hedging activity. To illustrate their argument, some participants point to a recent, seemingly innocuous