Banks and clients clash over novation MVA charges

Some banks swallowing new margin funding costs, others forcing clients to pay up

Banks and clients are having heated discussions about who should pay for new derivatives margin costs that occur when a non-cleared trade is novated to another dealer. While some banks are swallowing the costs, others are forcing clients to share the burden.

Since the margin rules for non-cleared swaps were introduced on September 1, large dealers have had to explain to clients that novations of their existing non-cleared, over-the-counter derivatives positions will incur initial margin charges