Bank initial margin posting raises liquidation concerns

Initial fears


In less than two months, long-awaited Basel III capital reforms will officially become a reality for many banks in both Europe and the US. In the run-up, derivatives dealers, like overweight bantamweight boxers crash-dieting to shed a few pounds before a fight, have been desperately trying to bring down their risk-weighted assets (RWAs), against which regulatory capital is held.

For most banks, the slimming-down strategy has centred on a handful of tried-and-tested techniques, including

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