H.R. 4659, a bill to require the appropriate Federal banking agencies to recognize the exposure-reducing nature of client margin for cleared derivatives

H.R. 4659 would change the calculation of a bank’s supplementary leverage ratio (SLR) to exclude from the ratio’s denominator the amount that a nonbank entity pays to the bank as collateral for certain derivatives contracts.[1] Currently, that collateral—also called the segregated margin—must be included as an asset in the SLR’s denominator.

CBO estimates that enacting H.R. 4659 would increase deficits by $44 million over the 2018-2028 period. That amount includes a net increase in direct spending of $46 million and an increase in revenues of $2 million. Most of those costs would be recovered from financial institutions in years after 2028. Because enacting the bill would affect direct spending and revenues, pay-as-you-go-procedures apply.

CBO estimates that enacting H.R. 4659 would not increase net direct spending by more than $2.5 billion or on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2029.

H.R. 4659 contains no intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA). Additional fees imposed by the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) would increase the cost of an existing mandate on private entities required to pay those assessments. However, CBO estimates that the incremental cost of the mandate would fall well below the annual threshold established in UMRA for private-sector mandates ($160 million in 2018, adjusted for inflation).