Rules will cause collateral demand to surge, experts say

04/11/2012 | Risk.net (subscription required)

Market participants are raising concerns about an increase in the amount of collateral that will be needed because of new regulations. Global standards on collateral for uncleared trades, central clearing for standardized derivatives and the liquidity coverage ratio in the Basel III rules could result in $7 trillion of collateral demand, some say. "If you take the liquid assets required by Basel III's LCR, central counterparties and potentially strict initial margin requirements on uncleared trades, there is no doubt these rules taken together will cause a collateral shock," said Peter Sime of the International Swaps and Derivatives Association.

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