Global banking regulators have issued interim rules that address one of the remaining issues in creating the new capital adequacy regime known as Basel III — the capitalization of bank exposures to central counterparties (CCPs).
The Basel Committee on Banking Supervision issued the rules Wednesday, noting that it has been working towards the G20 goal of creating incentives for banks to increase their use of central counterparties, while at the same time ensuring that banks’ exposures to CCPs are adequately capitalized.
Regulators intend to channel as much of the global derivatives market as possible through CCPs in the future.
Now, after two rounds of public consultation, and discussions with the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO), it has issued rules for capitalizing those exposures that are intended to take effect in January 2013.
It notes that exposures to CCPs that adhere to new CPSS-IOSCO Principles for Financial Market Infrastructures will receive preferential capital treatment. The rules also allow banks to choose from one of two approaches for determining the capital required for exposures to default funds.
Stefan Ingves, chairman of the Basel Committee and governor of Sweden’s central bank, noted that “capital requirements for bank exposures to CCPs is one of the final pieces of the Basel III capital framework, and we are pleased to have the interim rules established.”
“The Committee recognizes, however, that all components of the G20 reform agenda in relation to OTC derivatives are 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,” he said.