Capital standard for bank exposures to central counterparties finalised by the Basel Committee

10 April 2014

Press release

The Basel Committee has today published a final standard for calculating regulatory capital for banks' exposures to central counterparties (CCPs).

The final standard will replace the interim capital requirements that were published in July 2012. When developing the final standard - in close cooperation with the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO) - the Basel Committee sought to simplify the underlying policy framework and to complement relevant initiatives undertaken by other supervisory bodies, including the CPSS-IOSCO Principles for financial market infrastructures. The Committee also aimed to support broader policy efforts advanced by the G20 leaders and the Financial Stability Board, particularly those relating to central clearing of standardised OTC derivative contracts.

The final standard will take effect on 1 January 2017. The interim requirements will continue to apply until then. Although retaining many of the interim requirements, the final standard differs from them by:

  • including a single approach for calculating capital requirements for a bank's exposure that arises from its contributions to the mutualised default fund of a qualifying CCP (QCCP);
  • employing the standardised approach for counterparty credit risk (as opposed to the Current Exposure Method) to measure the hypothetical capital requirement of a CCP;
  • including an explicit cap on the capital charges applicable to a bank's exposures to a QCCP;
  • specifying the treatment of multi-level client structures whereby an institution clears its trades through intermediaries linked to a CCP; and
  • incorporating responses to frequently asked questions posed to the Basel Committee in the course of its work on the final standard.

Stefan Ingves, Chairman of the Basel Committee and Governor of Sveriges Riksbank, said "completion of the revised capital requirements for bank exposures to CCPs is another important step towards fulfilling our reform agenda. It shows that international standard-setting bodies, through close collaboration, can combine disparate perspectives and arrive at relatively simple solutions for complex issues."