Capital requirements for bank exposures to central counterparties - final standard

April 2014

The Basel Committee completed its work on the capital treatment of bank exposures to central counterparties, following a collaborative effort between the BCBS, the Committee on Payment and Settlement Systems (CPSS), and the International Organization of Securities Commissions (IOSCO) to improve upon the interim capital requirements that were published in July 2012. The final standard will take effect on 1 January 2017. The interim requirements will continue to apply until that time.

When developing the final standard, the Basel Committee sought to simplify the interim 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 differs from the interim requirements 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 how to treat 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.

A related consultative document was published in June 2013, which was followed by a joint quantitative impact study (QIS) that was designed to assess the capital impact of proposed revisions to the interim requirements, inform the calibration of the revised policy framework, and to obtain feedback on implementation issues and operational burden.

The Committee wishes to thank those institutions that responded to the consultative document and participated in the joint QIS exercise.