Leaked doc: EU bans initial margin haircuts to resolve CCPs

Council will ban resolution authorities from dipping into clearing members’ initial margin

Leaked documents seen by Risk.net reveal European Union legislators will forbid resolution authorities from being able to raid clearing members’ initial margin accounts if a central counterparty (CCP) runs into financial trouble. Banks have long complained the tool would incentivise a dash for the exit as soon as clearers see signs of stress at a clearing house, to reduce their potential exposure to initial margin haircutting.

“[Initial margin haircutting] would incentivise runs on a CCP,” says