Accounting puts brake on move to daily settled swaps

New margin approach threatens hedge accounting status, could hurt effectiveness

Steady on: banks need to carefully analyse the impact of changing the margin treatment

Hedge accounting rules are putting a brake on moves to treat daily variation margining for cleared swaps as settlement – a change that had promised big reductions in leverage exposure for bank members of central counterparties, and a corresponding cut in capital requirements.

If banks want to preserve the benefits of hedge accounting – a special status helping to dampen earnings volatility that might otherwise result from the use of derivatives – then they will need to carefully analyse the

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