Bank downgrades trigger billions in collateral calls – IFRE

 Bank downgrades trigger billions in collateral calls – IFRE

A series of ratings downgrades from Moody’s last week has created an unwelcome but manageable liquidity squeeze on three major banks, by forcing them to post billions of dollars in additional collateral against derivatives exposures.

Moody’s completed its rating review of international banks last Thursday and downgraded three major derivatives dealers below the crucial Single A threshold, which will likely have led to hefty collateral calls from counter parties.