Ring-fencing law swells Lloyds’ swap book

Recognition of intra-group trades boosts leverage exposure measure and CCP charges

UK ring-fencing rules forced Lloyds to recognise intra-group swaps as arm’s length trades between third parties, resulting in a huge increase in the size of its derivatives portfolio and associated capital costs.

Total notional derivatives at the UK lender ballooned £2.5 trillion ($3.3 trillion), or 69%, to £6.1 trillion in 2018. Cleared swap notionals jumped to £5 trillion from £3 trillion in 2017, and bilateral notionals to £1.1 trillion from £618 billion. 

It is understood the leap in

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