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Banks Face Billions in Collateral Needs Under EU Swap Rules

  • European Commission still has to approve the new rules
  • Collateral requirements estimated at 200 to 400 billion euros
Updated on

Europe’s biggest banks will need billions of dollars to meet collateral requirements for derivatives starting this year under the latest version of a key rule that seeks to reduce risk.

The standards, which will be phased in from September, may require EU buyers and sellers of swaps to set aside between 200 billion euros ($220.5 billion) and 420 billion euros in total once they are fully effective in 2020, three European regulators said on Tuesday in final draft standards. The requirement aims to stiffen standards for swaps contracted directly between traders rather than being settled at clearinghouses.