Fed weighing VM capital cut for cleared swaps

Powell implies support for practice that saved UBS $300m in capital

Federal Reserve
Some industry sources expect a stamp of approval for the margin treatment “in weeks, not months”

The US Federal Reserve is deciding where it stands on a margining practice that can slash capital requirements for cleared swaps, but questions remain over whether use of the approach will generate larger tax bills for US end-users.

Clearing houses and banks have obtained legal and accounting opinions to support the practice – in which variation margin payments are treated as daily settlement of the trade, rather than as collateral – and UBS disclosed a Sfr295 million ($300 million) capital

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