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

Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
FCA Report Examines Reduction in Barriers of Entry to Banking SectorRelated Articles
EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
FSB Sets Out Work Priorities for 2021
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
EU Publishes Corrigendum to Revised Capital Requirements Regulation
EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).
ESAs Issue Statement on Application of Sustainability Disclosures Rule
ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).
EC Consults on Crisis Management and Deposit Insurance Frameworks
EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.
HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA Proposes Standards for Supervisory Cooperation Under IFD
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE Addresses Banks in Scope of First Resolvability Assessment
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.