EU applies 8% haircut to margin-currency mismatches

European regulators confirm haircut will apply to both initial and variation margin

scissors cutting a dollar bill into strips

An 8% haircut would apply to variation margin under Europe's draft version of margin rules for non-cleared swaps, in cases where the currency of the collateral does not match a trade's settlement currency. The decision is an attempt by regulators to mitigate currency risk at the point of a counterparty default – which could be significant if a large dealer has collapsed – and clarifies a topic on which dealers claim they had received conflicting answers.

The haircut is bad news for the industry'

To continue reading...

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: