Suspend bank capital rules following an FCM default, CFTC told

Banks may be more likely to bid in post-default auctions if temporary capital relief is granted

Market participants want regulators to temporarily suspend bank capital requirements when a member of a central counterparty (CCP) defaults as a means to encourage the surviving firms to take on the positions of the failed member's customers.

A group of clearing experts tasked by the US Commodity Futures Trading Commission (CFTC) with recommending ways to strengthen CCP default management processes has discussed "whether there should be capital relief, at least on a temporary basis, for FCMs