Revised capital rules undermine OTC client clearing, dealers say

Central clearing for over-the-counter derivatives could be jeopardised by draft capital rules that encourage banks to clear, but discourage them from providing intermediary services to other derivatives users. This client clearing business needs support, dealers argue – and some politicians agree. By Ramya Jaidev

A lot of time and money is being invested in the drive to centrally clear over-the-counter derivatives, and regulators have promised to smooth the transition by creating capital incentives to use clearing houses. The latest, and probably final, version of the Basel Committee on Banking Supervision’s capital rules for central counterparty (CCP) exposures does that – offering risk weights of 2% and 4% for cleared trades, if certain conditions are met – but the November 2 consultative paper also