Featured Product

    US Agencies Propose to Update Derivative Contract Exposure Calculation

    October 30, 2018

    US Agencies (FED, FDIC, and OCC) jointly proposed to update the standard on how firms measure counterparty credit risk posed by derivative contracts under the regulatory capital rules. The proposal would provide the standardized approach for measuring counterparty credit risk (SA-CCR) as an alternative approach to the agencies' current exposure methodology (CEM), for calculating derivative exposure under the agencies' regulatory capital rules. Comments will be accepted for 60 days after publication in the Federal Register.

    The "advanced approaches" banking organizations—firms that have USD 250 billion or more in total consolidated assets or USD 10 billion or more in on-balance sheet foreign exposure—would be required to begin using SA-CCR by July 01, 2020. The proposal would modify other aspects of the capital rule to account for the proposed implementation of SA-CCR. It would require an advanced approaches banking organization to use SA-CCR with some adjustments to determine the exposure amount of derivative contracts for calculating total leverage exposure (the denominator of the supplementary leverage ratio). The proposal would also incorporate SA-CCR into the cleared transactions framework and would make other amendments, generally with respect to cleared transactions. The proposed introduction of SA-CCR would indirectly affect the FED's single counterparty credit limit rule, along with other rules. OCC is also proposing to update cross-references to CEM and add SA-CCR as an option for determining exposure amounts for derivative contracts in its lending limit rules.

    However, non-advanced approaches banking organizations would be allowed to use either CEM or SA-CCR to determine the exposure amount for derivative contracts. SA-CCR better reflects the current derivatives market and would provide important improvements to risk sensitivity, resulting in more appropriate capital requirements for derivative contracts exposure. The proposed changes are designed to better reflect the current derivatives market and incorporate risks observed during the 2007-2008 financial crisis.

     

    Related Links

    Comment Due Date: FR + 60 Days

    Keywords: Americas, US, Banking, Basel III, SA-CCR, Advanced Approaches, Derivatives, Regulatory Capital, US Agencies

    Featured Experts
    Related Articles
    News

    SEC Finalizes Capital and Margin Requirements for Security-Based Swaps

    SEC adopted a package of rules and rule amendments to establish capital, margin, and segregation requirements for security-based swaps, under Title VII of the Dodd-Frank Act.

    August 22, 2019 WebPage Regulatory News
    News

    ECB Revises Prudential Provisioning Expectations for New NPEs

    ECB is revising its supervisory expectations for prudential provisioning of new non-performing exposures (NPEs) specified in the “Addendum to the ECB Guidance to banks on non-performing loans” (Addendum)

    August 22, 2019 WebPage Regulatory News
    News

    CFTC Proposes to Revise Information Collection on Margin Requirements

    CFTC is requesting comments on the burdens associated with certain aspects of the Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (final rule).

    August 21, 2019 WebPage Regulatory News
    News

    FASB to Delay Effective Date for Insurance Contracts Standard

    FASB issued a proposed Accounting Standards Update that would grant all insurance companies that issue long-duration contracts, such as life insurance and annuities, additional time to apply the standard that addresses this area of financial reporting.

    August 21, 2019 WebPage Regulatory News
    News

    EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.9

    EBA published phase 2 of its technical package on the reporting framework 2.9, which includes validation rules, Data Point Model (DPM) data dictionary, and XBRL taxonomies.

    August 21, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Its Consultation Related to SME Financing

    FSB published responses received to the consultation on a report on the evaluation of the effects of financial regulatory reforms on small and medium-sized enterprise (SME) financing.

    August 21, 2019 WebPage Regulatory News
    News

    APRA Revises Related Entities Standard for Banks

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups.

    August 20, 2019 WebPage Regulatory News
    News

    EBA and ESMA Issue Joint Response to EC Letter on Crypto-Assets

    EBA and ESMA issued a joint response to the EC letter, from July 19, 2019, on crypto-assets.

    August 20, 2019 WebPage Regulatory News
    News

    FSB on Responses to Consultation on Wind-Down of Trading Portfolios

    FSB published responses received to the consultation on the solvent wind-down of the derivatives and trading book portfolio of a global systemically important bank (G-SIB).

    August 19, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Consultation on Resolvability Disclosures

    FSB published responses received to the consultation on disclosures for resolution planning and resolvability of banks.

    August 19, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3681