PRA could be more flexible on matching adjustment collateral
The PRA’s rigid view on posting collateral from matching adjustment portfolios is mistaken, says Simeon Rudin of Freshfields Bruckhaus Deringer, forcing firms to repaper trades with no tangible benefit for policyholders
The position of the UK regulator on managing collateral in matching adjustment (MA) portfolios is at risk of adding to firms’ costs without enhancing the security of policyholders.
The Prudential Regulation Authority (PRA) set out requirements for derivatives and collateral within a Solvency II matching adjustment (MA) portfolio in a March 28 letter, making clear that derivatives relating to assets held partly in MA portfolios and partly outside will have to be split.
The PRA also said
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