Banks and clients clash over novation MVA charges

Some banks swallowing new margin funding costs, others forcing clients to pay up

wall-street-skyscrapers

Banks and clients are having heated discussions about who should pay for new derivatives margin costs that occur when a non-cleared trade is novated to another dealer. While some banks are swallowing the costs, others are forcing clients to share the burden.

Since the margin rules for non-cleared swaps were introduced on September 1, large dealers have had to explain to clients that novations of their existing non-cleared, over-the-counter derivatives positions will incur initial margin charges

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