In order to clarify an inconsistency between the legislative intent and certain implementing language in the Dodd Frank Act, regulators re-proposed a rule to exempt most end-users from posting mandatory initial margin. Such a rule eliminates much of the capital inefficiency and favors non-speculative hedging transactions using derivatives products. Direct Swap applauds this important rule making.
To help end-users, regulators backed off an idea that would have required banks to force non-financial firms to post collateral if they crossed specific thresholds of creditworthiness. Banks will instead be required to collect collateral according to their own assessment of clients’ risks.