The Federal Reserve proposed collateral requirements for swapstraded between banks, manufacturers, and other firms. The proposal,also scheduled to be adopted today by the Federal Deposit InsuranceCorp. (FDIC) and Office of the Comptroller of the Currency (OCC),seeks to free so-called end users—commercial manufacturers andother non-financial firms that use swaps to hedge businessrisks—from government collateral requirements.

The regulation determines how much collateral is necessary toreduce risk in the market for swaps traded directly betweenJPMorgan Chase & Co., Goldman Sachs Group Inc., BP Plc, andothers, instead of those guaranteed at a clearinghouse. There-proposal is open for public comment before it's completed.

The revised proposal seeks to limit the impact on globalliquidity and smaller companies by freeing firms from having topost the first $65 million worth of collateral. To help end users,the regulators backed off an idea that would have required banks toforce non-financial firms to post collateral if they crossedspecific thresholds of creditworthiness. Banks will instead berequired to collect collateral according to their own assessment oftheir clients' risks.