Long-awaited guidelines from international regulators will require market participants to back exotic swap trades with collateral, but market participants warn the proposals risk regulatory arbitrage for banks that also need to adhere to separate capital charges.

David Clark, chairman of the Wholesale Markets Brokers' Association, a trade association for interdealer brokers, told Financial News: "Banks will assess the costs of the capital charges and consider the liquidity and collateral costs of them. If they don't equate with the margin costs, there is a real danger of regulatory arbitrage."