Banks put ‘lazy’ assets to work in first initial margin agreements

Banks tout 'tremendous' capital savings as Bank of America, Barclays, Citi and other swap dealers start using illiquid assets as initial margin

Large derivatives dealers have started posting lump sums of initial margin to each other in an attempt to reduce the capital they hold for derivatives counterparty risk – a first for the over-the-counter market. At least five banks are said to have signed agreements so far, including Bank of America, Barclays, Citi, Deutsche Bank and UBS.

The banks all declined to comment or failed to respond to requests for comment, but traders at a number of these institutions say the posting of initial margin