US dealers slam capital hit on clearing for unreal CVA risk

Fed would diverge from Basel standards by imposing CVA capital on client-cleared trades

US banks warn that proposed prudential regulations could force them to capitalise a risk from their clearing clients that may not even exist. Sources say it could increase costs for end-users of cleared products, and potentially reduce capacity in the business at a time when US markets regulators are looking to broaden clearing mandates.

“We’re concerned that if this rule moves forward without change, there might be further concentration in the market and less liquidity,” says a regulatory expert