Dealers wake up to MVA impact of new funding rules

NSFR will force dealers to term-fund initial margin at a time when margin volumes are climbing

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Term funding for initial margin will add to MVA, dealers fear

The cost of posting initial margin for over-the-counter derivatives trades is set to jump at the same time as a three-figure-billions leap in margin requirements – a one-two punch that results from the implementation of Basel III's net stable funding ratio (NSFR) alongside new margining rules for non-cleared trades.

The interaction between the two has only recently been spotted by some dealers. Experts warn the new rules will add to existing pressures on the OTC market, and could drive up costs

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