Pimco urges Basel to fix leverage ratio
Pimco has warned that the Basel III capital requirements could lead to more systemic risk by driving up the cost of clearing derivatives and concentrating risk in fewer market participants. In a white paper published in April, the California-based asset manager noted that banks will be required to hold capital against margin posted by their clients even when that margin is segregated from the bank’s own funds. Pimco also noted that this is causing banks to raise costs for end-users and causing some to “exit the clearing business altogether.” Pimco encouraged the Basel Committee, which sets these capital requirements, to reassess the treatment of client margin in leverage ratios and funding requirements.
