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October 20, 2011

LCH now takes KfW bonds as collateral

LCH have announced (http://www.lch.co.uk/member_notices/circulars/2011-10-20.asp) they will now take bonds issued by KfW as collateral against their many clearing services. KfW is equivalent to a US “GSE”, a government sponsored entity, so can be considered as safe as a government issue.

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From November 1, 2011, bonds issued in EUR by the Kreditanstalt f├╝r Wiederaufbau (KfW) will be accepted by LCH.Clearnet Limited (LCH.Clearnet) for the purposes of margin collateral.

This addition to acceptable margin collateral will be subject to the following criteria:

  • Continuing explicit and unconditional guarantee provided by the Federal Republic of Germany.
  • The application per clearing member of a concentration limit, set at the lower of 20% of total margin requirement, excluding variation margin, or EUR 500million.
  • A further concentration limit of 10% of the total amount outstanding on any acceptable ISIN applied at a clearing member level.
  • A managed ISIN list requiring appropriate nominal size and sufficient market price quotes for each issue, all as determined by the Risk Management department of LCH.Clearnet.

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