Why Rising Credit Costs Are Reshaping FX Prime Brokerage

Counterparty risk capital rules and balance sheet constraints are presenting banks with a tricky balancing act, argues fintech expert

Foreign exchange dealers have had to contend with the growing cost of trading with end-clients, whether through brokerage fees or capital requirements. This is also true for foreign exchange prime brokers, where increasingly constrained balance sheets have changed the economics of providing credit.

At the heart of this is the standardised approach to counterparty credit risk (SA-CCR), the framework used to calculate how much capital banks must hold against derivatives trades. As the rule looks at

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