Dealers face funding time-bomb from one-way CSAs

bomb

Major dealers are each facing multiple billions of dollars in funding obligations as a result of derivatives trades with sovereign, supranational and agency (SSA) clients that refuse to post collateral to the banks. Those requirements could increase dramatically as interest rates rise, creating a funding time-bomb that regulators are doing nothing to defuse, dealers warn.

"There are large exposures associated with these trades and if there is a big market move, some less well-controlled banks

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