Bringing the United States in line with most other countries, the Federal Deposit Insurance Corporation board of directors voted Tuesday to repeal an Obama-era regulation that requires insured depository institutions to collect initial margin from affiliates.
Originally developed as part of the regulatory reforms mandated by the 2010 Dodd-Frank Act, the swap margin rule, established in the fallout from the 2008 financial crisis and issued in 2015, is now seen by some as too stringent. When banks collect initial margin from their affiliates, “the financial collateral is locked up, frozen, and available only in the event that the affiliate fails,” said FDIC Chair Jelena McWilliams at an FDIC board meeting on Sept. 17. Thanks to other reforms, though, a failure scenario “has become much less likely” she continued.
