Collateral: look, but don’t touch

The Basel Committee has proposed a zero risk weight for collateral posted to a central counterparty, if those assets are bankruptcy-remote. What impact will this have on the way clearing houses treat collateral posted with them? Matt Cameron reports

The global push by regulators to require a vast swath of the over-the counter derivatives market to be cleared has central counterparties (CCPs) rubbing their hands in anticipation. Not only will CCPs benefit from an enormous increase in revenue generated from clearing fees, but certain clearing houses will also look to generate additional revenue from the torrent of initial margin about to flow their way – estimated by Manmohan Singh, senior economist at the International Monetary Fund, to be