U.S. Banks to Lose Foreign Government Clients?

Risk Magazine’s Duncan Wood and Matt Cameron

“Non-US [governments] say they could stop executing over-the-counter derivatives with US banks if their counterparties are obliged to collect collateral from them – as envisaged in proposals from US prudential regulators … Sovereigns typically don’t post collateral, and most say they are unwilling to change – whether their counterparties are required to collect it or not. … US dealers are aware of the threat. ‘Sovereigns just won’t do business with us’ … says one lawyer at a US bank in New York. … Marty Pfinsgraff, deputy comptroller for credit and market risk at the OCC in Washington, DC, says the intent is to apply the rules to US banks at home and abroad. ‘It covers US banks, whether they’re booking the trades here or at entities overseas,’ he says. Pfinsgraff says the prudential regulators haven’t ruled out broadening the scope of the rule so they capture US as well as foreign sovereigns.”



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