Europe’s largest industrial companies have raised concerns about the European Commission’s over-the-counter (OTC) derivatives proposal, Financial Times reports. The plan will enforce punitive capital charges on banks providing OTC derivatives to companies thereby stifling legitimate hedging activities.
The companies argued that being forced to use clearing will drain cash and prevent legitimate hedging of business risk. The proposed new capital requirements for banks’ use of OTC derivatives will make the use of financial instruments expensive and remove the benefit of exemption these companies were getting under the European Market Infrastructure Regulation.
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