Oppose Bank Capital and Margin Regulations Affecting Customers’ Use of Derivatives

MFA urges policymakers to adopt a deduction from the leverage exposure denominator in the U.S. supplementary leverage ratio (SLR) for customer initial margin for centrally cleared derivatives. MFA opposes the current formulation of the SLR because it undermines derivatives clearing and therefore it undermines the intent of Title VII. The SLR does not consider initial margin that MFA Members post with their respective clearing firms as a risk-mitigant. MFA applauds the House Financial Services Committee’s approval in early 2018 of bipartisan legislation that would direct the Federal banking regulators take this exposure-reducing effect of client margin into account.  MFA also supports companion legislation introduced in the Senate in 2019 and encourages both legislative and regulatory efforts to ensure the SLR reflects the effect of initial margin to reduce risk.