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The industry group claims a proposal to enact strict limits on how much credit exposure the largest banks can have to a major counterparty has significant design problems that could raise the cost of credit.
July 20 -
A recent survey by Ernst & Young shows more progress by banks to address deficiencies in their risk management practices, but growing concern for Basel III and new liquidity rules.
July 6 -
The Basel Committee on Banking Supervision issued a final directive to clarify how global banks must disclose the capital they use to meet regulatory requirements under Basel III.
June 26
WASHINGTON — The Basel Committee on Banking Supervision on Wednesday issued an interim rule outlining the amount of capital banks should hold to cover their central counterparties' exposure.
The framework agreed to by the 27-member body builds on new international guidelines that are meant to improve the robustness of the essential infrastructure.
"Capital requirements for bank exposures to CCPs is one of the final pieces of the Basel III capital framework," said Stefan Ingves, chairman of the committee, in a press release.
Under the interim rule, a CCP that is supervised in a manner consistent with these principles will receive a preferential capital treatment. Specifically, trade exposures will receive a nominal risk-weight of 2%.
The interim rule also specifies that a bank would be allowed to choose from one of two approaches for determining the capital required for exposures to default funds either a risk-sensitive approach or a simplified method.
Under the simplified method, the default fund exposures would face a 1,250% risk weight, which would be subject to an overall cap based on the volume of a bank's trade exposure. Global regulators have been working on a risk-sensitive approach for the last two years.
"In developing these rules, the committee has been cognizant of the need to create incentives to increase the use of central counterparties, even where this is done via indirect clearing," the committee said. "The interim rules therefore include provisions on indirect clearing that allow clients to benefit from the preferential treatment for central clearing."
The committee said further work is needed in regards to over-the-counter derivatives rules which have yet to be finalized.
"We will therefore continue to actively monitor the capital requirements in this area, and their interaction with other policy initiatives, to ensure they remain both robust and consistent with the broader G20 objectives," said Ingves.
