US derivatives regulation will impact Asian treasurers

Pending financial reforms will require banks to put up more collateral to back trading in FX and interest rate swaps, potentially increasing the cost of these tools for treasurers.
Senator Blanche Lincoln speaking after the US Senate passed financial reform legislation in May. (Source: AFP)
Senator Blanche Lincoln speaking after the US Senate passed financial reform legislation in May. (Source: AFP)

Proposed new financial regulations in the US set out to better prepare the financial services industry for systemic risks, but their reach will be further than many lawmakers expect. Senator Blanche Lincoln's proposed changes to derivatives rules, including foreign exchange FX and interest rate swaps, will impact corporate treasuries in Asia.

Unfortunately, no one knows just what that impact will be.

There's an overall concern over what additional costs, related to capital charges, that swap dealers could pass along to end-users through wider bid offers or other fees, said Jiro Okochi, chief executive and co-founder of Reval, a provider of solutions that help the end-users of derivatives better price and manage their positions....

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