Bank Capital Regulation and Derivatives Clearing

44 Pages Posted: 12 Aug 2022

Abstract

As part of the post global financial crisis reforms, regulators introduced a leverage ratio requirement, a minimum capital requirement over a bank's total exposures. We assess the consequences of this requirement for derivative clearing services to clients, which creates exposures for the dealers, by exploiting its earlier introduction in the United Kingdom and detailed confidential transaction and portfolio data. UK dealers reduce their client clearing business following the introduction of the requirement, particularly dealers with lower capital positions and for longer-term derivatives; they are also more likely to end client relationships. Capital regulation might indirectly limit access to clearing services.

Keywords: financial regulation, leverage ratio, Derivatives, clearing, Banking

Suggested Citation

Rodriguez Tous, Francesc and Ferrara, Gerardo and Acosta Smith, Jonathan, Bank Capital Regulation and Derivatives Clearing. Available at SSRN: https://ssrn.com/abstract=4188544 or http://dx.doi.org/10.2139/ssrn.4188544

Francesc Rodriguez Tous (Contact Author)

Bayes Business School ( email )

106 Bunhill Row
106 Bunhill Row
London, EC1Y 8TZ

Gerardo Ferrara

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Jonathan Acosta Smith

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
51
Abstract Views
320
Rank
730,781
PlumX Metrics