AFR Education Fund wrote a letter to banking regulators urging them to maintain risk controls for derivatives transactions at large banks Download the letter here. January 23, 2020 RE: Margin and Capital Requirements for Covered Swaps Entities (OCC Docket ID OCC–2019– 0023; Federal Reserve
We strongly oppose the proposal to remove requirements to post initial margin when engaging in inter-affiliate derivatives transactions with covered swaps entities. The Agencies instituted this requirement just four years ago, concluding that these margin postings were necessary to “protect the safety and soundness of the covered swap entity in the event of an affiliated counterparty default”. Since this issue affects the key depository affiliates of the largest U.S. banks – entities at the heart of the taxpayer-supported safety net for systemically critical banks – the 2015 Final Rule also concluded that failing to require initial margin for inter-affiliate swaps would pose a threat to broader systemic stability.
Click here to download a PDF version of the letter.