Non-financial commercial companies (commercial end-users) often secure their derivatives transactions, such as swaps, with financial institutions in a manner other than posting cash margin, such as by granting liens on the commercial end-user’s assets. However, a pending proposal to revise U.S. bank risk-based capital rules regarding derivatives may have the indirect consequence of possibly lessening the ability of commercial end-users to enter into such transactions with U.S. banking organizations (banks).

This month’s column will discuss this proposal and the concerns commercial end-users have raised about the proposal in its current form.

Background