Basel releases new capital standards

MANILA, Philippines - The Basel Committee has 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.

The new standard differs from the temporary requirements by:

• (including a single approach for calculating capital requirements for a bank’s exposure that arises from its contributions to the mutualized default fund of a qualifying CCP (QCCP);

  • (employing the standardized 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.

In a statement, Stefan Ingves, chairman of the Basel Committee and Governor of Sveriges Riksbank, said that the completion of the revised capital requirements for bank exposures to CCPs is another important step towards fulfilling the 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,” Ingves added.

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 CPSS also aimed to support broader policy efforts advanced by the G20 leaders and the Financial Stability Board, particularly those relating to central clearing of standardized OTC derivative contracts.

The final standard will take effect on January 2017.