On August 14, 2017, the US federal banking agencies (Federal Reserve Board (FRB), Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC)) issued interagency guidance on the risk-based capital treatment of certain centrally cleared derivative contracts.
The guidance was issued because some central counterparties recently modified margin requirements for certain centrally cleared derivative contracts that resulted in particular types of margin being considered a settlement and transfer of title to the receiving party, rather than collateral and retention of title by the posting party. The guidance details how banks should calculate their risk-based capital requirements for these products in light of the change in these requirements.
FDIC Vice Chair Thomas H. Hoenig issued a statement expressing his concern over the guidance, expressing the opinion that it could result in banks reserving less capital than necessary relative to the risks of these contracts.