Dealers charging FVA on collateralised swaps

Dealers say even swaps collateralised with liquid government securities could incur an FVA charge

Some dealers are starting to charge customers a funding valuation adjustment (FVA) on collateralised swaps – a step that has mystified and angered clients, which are used to facing FVA only on uncollateralised trades. Banks say the charge would only be applied where received collateral is difficult to rehypothecate and therefore gives rise to a funding cost.

"Certain types of collateral are a lot more difficult to reliably fund, especially in stressed markets. And if you can't rehypothecate the