VM change helps Barclays cut derivatives by $113bn

Three factors slashed size of book by 25%, including move to treat margin as settlement

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Barclays' Q2 earnings showed a big drop in derivatives assets and liabilities over the first six months of this year

Barclays has become the latest bank to confirm it is treating variation margin as the settlement of a cleared derivative, rather than as collateral – a move that contributed to an £87 billion ($113 billion) drop in the size of the bank’s derivatives assets, according to its second-quarter results.

Major clearing houses have obtained legal opinions to support what’s known as settled-to-market (STM) treatment of cleared swaps, but US banks have been wary of adopting the practice without regulator

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