Huge capital savings at stake in STM swaps debate

Estimates show portfolio would generate 250% more capital in worst-case version of new margining treatment

US Federal Reserve building
The Federal Reserve and other US regulators issued guidance on new VM approach in August

Banks have found a way to slash the capital required on cleared swaps, but are now debating exactly how big the saving should be – a question that turns on the fine detail of the leverage ratio.

Analysis by software firm OpenGamma suggests the capital requirement in the worst-case scenario for the industry would be roughly two-and-a-half times greater than in the best case.

Chris Perkins, global head of over-the-counter derivatives clearing at Citi, says “a lot of banks are looking at” the

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