Wall Street banks will escape billions of dollars in additionalcollateral costs after U.S. regulators softened a rule that wouldhave made their derivatives activities much more expensive.

Two agencies approved a final rule on Thursday that will governhow much money financial firms must set aside in derivatives deals.A key change from recent draft versions of the rule—and the focusof months of debate among regulators—cut in half what the companiesmust post in transactions between their own divisions.

A version proposed last year called for both sides to postcollateral when two affiliates of the same firm deal with oneanother, such as a U.S.-insured bank trading swaps with a U.K.brokerage. The final rule requires that only the brokerage post,cutting collateral demands by tens of billions of dollars acrossthe banking industry. Those costs would still be significantlyhigher than the collateral they currently set aside.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.