Global Banks, Funds Call for More Capital from Derivatives Clearing Houses

NEWYORK (Reuters) – Four global banks and five big fund managers called on international regulators on Thursday to require for-profit derivatives clearinghouses to put up more of their own capital to protect against cascading losses that could rock the world financial system.

Members of the group, including Citigroup Inc, <C.N> JPMorgan Chase & Co <JPM.N> and BlackRock Inc <BLK.N>, published their views to try to shift in their favour prolonged policy debates over how clearinghouses should be fortified.

Regulators put clearinghouses at the centre of trading in over-the-counter credit derivatives and interest rate swaps after the 2008 financial crisis. But the regulators have yet to agree on detailed protocols for shoring up, or safely winding down, clearinghouses wounded by customer defaults.

The task is arguably the biggest unfinished post-crisis reform and has become important as large clearing houses have become, like banks, too big to fail.

“We believe current capital requirements are insufficient,” the group said in the white paper.

The clearinghouses, known as central counterparties, stand between both sides of trades and ensure their completion even if one side goes bust.

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