The Federal Deposit Insurance Corporation’s board of directors, along with other banking regulators, has approved a final rule establishing minimum margin requirements for certain swaps that are not cleared through a clearinghouse.
The rule requires insured depository institutions that are designated by the Securities and Exchange Commission or Commodity Futures Trading Commission as swap dealers or major swap participants to post and collect initial margin on non-cleared swaps entered into with other dealers, and with financial end users that have at least $8 billion in non-cleared swaps. Initial margin—collateral set aside to offset the risk of the trade—can be held as cash, foreign currency, treasuries or corporate and municipal bonds. The FDIC projects that the new requirement will add roughly a 30 percent premium to traditional swap margin requirements. The rule also requires so-called “variation margin” to be posted if the values of a transaction shift over time; it must be posted in cash.
