Exclusive: Capital One got CFTC waiver after oil price plunge increased swap exposure - sources
WASHINGTON/NEW YORK (Reuters) - U.S. lender Capital One Financial Corp got a waiver from the Commodity Futures Trading Commission (CFTC) after plunging oil prices increased the bank's derivatives exposure above a key regulatory threshold, according to two sources with knowledge of the matter. A spokesman for the CFTC said it issued the waiver to protect the bank and its energy clients from undue disruption, given the unprecedented market conditions over the past month amid the coronavirus outbreak. The bank is a relatively small player in the energy lending and financing business, with energy loans accounting for just 1.4% of its total loan book, its filings show. As part of that business, Capital One enters into commodity swaps with its commercial oil and gas clients to help them mitigate the risk of energy price swings and the related borrowing risks. Typically, those trades do not bring Capital One's swaps exposure anywhere close to the CFTC's registration threshold, according to the CFTC's Friday notice. But a 50% plunge in crude oil prices caused by the coronavirus and a flood of supply by top producers has seen its exposure on those swaps balloon, putting it on course to hit the threshold by the end of this month, the CFTC said.