Australasia's big banks have "largely got what they were looking for" from watered down international derivatives regulations, the Australian Financial Review reports.
Global banking and securities regulators have confirmed financial institutions will have to pay a “margin” if they don't clear derivative transactions through specialist third parties. But, in a change from previous drafts of the new rules, foreign exchange transactions associated with “cross currency swap” derivatives will be exempt from the requirements, the AFR reports.
The Australian parents of New Zealand's ANZ, ASB, BNZ and Westpac, who are heavy users of cross currency swaps, had pushed for the concession. An earlier AFR report suggested the Aussie banks would have to pay a margin of 6% on about A$350 billion of cross currency swaps.
A Reserve Bank of New Zealand estimate earlier this year put New Zealand banks' combined outstanding cross currency swaps, used to convert money borrowed overseas into New Zealand dollars to help fund bank balance sheets and subsequently home loans and business loans, at about NZ$35 billion.
Australian Securities and Investments Commission chairman Greg Medcraft, also chairman of the International Organisation of Securities Commissions, reportedly supported the Aussie banks and pushed for the exemptions with international regulatory colleagues. KPMG partner Craig Davis told the AFR Australia’s banks would have faced a bill that could have been in the hundreds of millions of dollars if the exemptions had not been made.
“The banks largely got what they were looking for,” the AFR reported Davis saying. “This could have cost them a significant amount of money.”