Banks want derivatives collateral included in LCR

Received collateral is currently counted towards the liquidity reserve at some large banks, but should not be included in the LCR, say sceptics, who argue the assets can't be relied upon

Banks are arguing they should be allowed to use received derivatives collateral to help satisfy the liquidity coverage ratio (LCR), part of the Basel III package of prudential reforms. But regulators are sitting on the fence, and even some industry sources say the practice is dubious.

The numbers involved are unclear. Large dealers can hold tens of billions of dollars in received collateral at any point in time, but – as long as the credit support annex governing the posting of collateral allows