Capital savings from new IM regime elude dealers

Slow model development and approval processes mean banks yet to see benefits expected under margin rules

Banks say capital savings haven't materialised but funding costs have risen

The new initial margin requirements for non-cleared swaps have increased dealers’ funding costs, but banks say they have been unable to obtain the capital benefits as regulators are yet to approve their updated models.

“My understanding is that no-one has been able to model it properly and get the model approved by the regulators – and no-one is getting capital relief yet from the initial margin,” says Jon Gregory, an independent derivatives valuation adjustment (XVA) expert.

From September 1

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