Fed weighing VM capital cut for cleared swaps
Powell implies support for practice that saved UBS $300m in capital
The US Federal Reserve is deciding where it stands on a margining practice that can slash capital requirements for cleared swaps, but questions remain over whether use of the approach will generate larger tax bills for US end-users.
Clearing houses and banks have obtained legal and accounting opinions to support the practice – in which variation margin payments are treated as daily settlement of the trade, rather than as collateral – and UBS disclosed a Sfr295 million ($300 million) capital
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