Central clearing could damage pensions
Proposals to force pension funds to clear OTC derivatives centrally could increase risk levels for pension funds due to increased costs from complying with margin requirements, forcing such funds to engage in riskier investment strategies to make up the difference.
The article quotes Tom Kirby, director, regulatory and risk management at Ernst Young as saying: "In a worst case scenario, a whole range of costs will increase, and the increases will be worse if there is initial and variation margin segregation on top. These will all be passed on to the buy-side as fees."
Publication
Financial Times
Date
January 9, 2011
Cross References (links may require a Cabinet subscription)
Dodd-Frank Act, Title VII, Sec. 723