Corporate treasuries are starting to feel capital cost pain
After years of stable IRD usage, corporate hedging is getting more expensive and even clearing may not help
Higher capital costs associated with the derivatives products used by corporate treasuries for hedging are starting to filter through to end-clients, according to research from Greenwich Associates, which found that despite years of stable usage of interest rate derivatives (IRD), capital rules are finally having an impact.
"The higher cost of capital for banks might finally be making its way into corporate treasury departments. Whereas most financial end-users post collateral to offset these
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