Adoption of the settled-to-market (STM) technique for cleared swaps trades slashed billions off of US banks’ gross derivative assets and liabilities, but has had a less marked effect on their leverage ratio exposures.
Bank of America Merrill Lynch (BAML), Morgan Stanley, JP Morgan, Goldman Sachs, Wells Fargo, and Citigroup all started treating the variation margin on their cleared swaps as settlement instead of collateral in 2017. The shift allowed the banks to cut billions off of their gross
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