US farm lenders fear clearing will trip leverage ratio
Posted collateral cannot be used to offset liabilities when calculating farm credit banks' leverage ratio
The requirement to post initial and variation margin on centrally cleared derivatives trades could cause US farm credit banks (FCBs) to breach their regulator-set leverage ratios, the banks warn – potentially forcing them to suspend dividend payments, raise new capital, or sell off assets. The four banks – AgFirst, AgriBank, Farm Credit Bank of Texas and CoBank – are seeking a clearing exemption, and have urged their regulator, the Farm Credit Administration (FCA), to intervene.
The FCBs, which
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