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    BCBS Assesses NSFR and Large Exposures Rules in US

    September 14, 2023

    The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S. The assessments, which form part of the Regulatory Consistency Assessment Program (RCAP), deemed the respective U.S. regulations to be Largely Compliant with the global NSFR and large exposure standards. The RCAP assessments grade key aspects of rules from various jurisdictions as Compliant, Largely Compliant, Materially Non-Compliant, and Non-Compliant. The published reports also outline the post-assessment suggestions from the Basel Committee, along with the responses from the regulators in U.S.

    Report on assessment of NSFR requirements. The report notes that the U.S. rules have been deemed to be Compliant with the international standard on aspects related to the disclosure requirements and to the scope, minimum requirements, and application issues. Moreover, the U.S. rules have been found to be Largely Compliant with respect to the available stable funding (ASF; numerator) and Materially Non-Compliant with respect to the required stable funding (RSF; denominator) components. With respect to certain assets being assigned a 0% RSF factor, the views of the US agencies differ from those of the assessment team. The report also identified an item for follow-up assessment and this relates to the calculation of derivative asset amounts. According to the US agencies, the conditions specified in the Basel framework were incorporated in paragraphs (3) and (4) of the definition of a qualifying master netting agreement in 12 CFR 217.2 but do not currently appear in the Code of Federal Regulations due to a technical issue, which the US agencies assured to address at the next opportunity.


    Report on assessment of large exposures rules. The large exposures framework in U.S. was found to be Compliant in the areas of the scope and definitions and the minimum requirements and transitional arrangements. However, with respect to the value of exposures, the frameworks in U.S. has been assessed as Materially Non-Compliant. The overall grade is driven by a material finding related to the definition of exposure values and eight findings that were deemed not material. For the definition of exposure values, the U.S. regulations allow that derivatives may be valued using any of the methods that the bank is authorized to use, including the internal model method (IMM), while the Basel large exposures framework requires such transactions to be valued using the standardized approach for counterparty credit risk (SA-CCR) only. The Assessment Team noted that the rules in the US are super-equivalent to the Basel framework in four areas. In accordance with the methodology and guidance provided in the RCAP Handbook for jurisdictional assessments, the stricter rules have not been taken into account as mitigants for the overall or component-level assessment of compliance.

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    Keywords: International, US, Banking, NSFR, Large Exposures, Basel, RCAP, Liquidity Risk, Credit Risk, BCBS

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