Basel leverage ratio would double up collateralised OTC positions
Collateralised derivatives positions will be doubled in size under the revised leverage ratio published yesterday by the Basel Committee on Banking Supervision – a prospect that is already alarming traders who fear it could force a retreat from some business lines.
The doubling effect occurs because banks are not allowed to deduct collateral from the size of their derivatives assets, and also requires the collateral itself to be counted as part of an institution's total exposure.
"Currently, our
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