BCBS Consults on Leverage Ratio Treatment of Cleared Derivatives
BCBS is consulting on amendments to the treatment of client cleared derivatives under the Basel III leverage ratio. This consultative document seeks views on whether a targeted and limited revision of the leverage ratio's treatment of client cleared derivatives may be warranted. Comments are requested by January 16, 2019.
BCBS is consulting on whether a targeted and limited revision of the treatment of leverage ratio of client cleared derivatives may be warranted. This proposal is based on the findings of the BCBS review of the impact of the leverage ratio on banks' provision of client clearing services. The proposal also considers the key policy objectives of G20 leaders to prevent excessive leverage and improve the quality and quantity of capital in the banking system and to promote central clearing of standardized derivatives contracts. Stakeholders are invited to provide concrete and robust empirical evidence to support their views. The range of treatments that BCBS may consider include:
- No change to the current treatment
- An amendment to the treatment of client cleared derivatives to allow cash and non-cash initial margin received from a client to offset the potential future exposure of client cleared derivatives
- Alignment of the treatment of client cleared derivatives with the standardized approach for measuring counterparty credit risk exposures (SA-CCR).
The alignment of the treatment of client cleared derivatives with SA-CCR would have the effect of allowing both cash and non-cash forms of initial margin and variation margin received from a client to offset the replacement cost and the potential future exposure amounts of client cleared derivatives. In addition, BCBS is requesting feedback on the merits of introducing a requirement for initial margin to be segregated in order for any amended leverage ratio treatment to apply. Views are also being sought on the forward-looking behavioral dynamics of the client clearing industry that might result from any amended treatment.
Related Links
Comment Due Date: January 16, 2019
Keywords: International, Banking, Client Cleared Derivatives, SA-CCR, CCP, Basel III, Leverage Ratio, BCBS
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
EBA Opinion on Treatment of Credit Insurance in Prudential FrameworkRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.