The end for one-way CSAs

Sovereign derivatives users have been able to avoid posting collateral to their dealer counterparties in the past, but pending reforms to bank capital and funding rules are changing the equation. If sovereigns refuse to budge, they will have to accept higher transaction costs. Duncan Wood reports

Dealers are threatening to raise prices for their most prestigious, touchy and powerful customers – central banks, debt offices, local governments and other sovereigns – in an attempt to force them to post collateral or use clearing for their derivatives trades. It’s a tactic that is having some success – Portugal’s debt management office is set to become one of the first sovereign derivatives users to submit collateral to its bank counterparties – but in many instances, dealers are caught in a