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Wednesday, November 26, 2014

ABA, Clearing House Seek Relief on Margin for Internal Swaps

ABA — joined by the Clearing House and the ABA Securities Association — urged banking regulators and the CFTC not to impose margin requirements on swaps among affiliates within a single banking organization. The letter came in response to proposed rules to require swap dealers and market participants to exchange initial margin and variation margin with counterparties for swaps not cleared by a central counterparty.

Inter-affiliate swaps “are a prudent and critical way” for banks to manage operations and risk, the groups said — adding that the proposed rules would “unnecessarily constrain this important internal risk management tool … while providing no demonstrable benefit to the organizations themselves or the broader swap markets.”

In a separate letter, ABA urged the agencies to revisit several other aspects of the proposal. It sought changes and clarifications on harmonization of the rules in the U.S. and internationally, the treatment of small banks, segregation of collateral, what qualifies as eligible collateral, the treatment of cross-border transactions and the implementation schedule.

Read the joint letter.
Read ABA’s letter.

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