The Basel Committee on Banking Supervision’s 2017 measure, called the standardized approach for counterparty credit risk, overestimates banks’ expected exposure for cleared derivatives, the recent analysis found.
The SA-CCR standard “is not just on average conservative, but much more conservative for cross-currency portfolios,” the CFTC’s clearing and risk unit study said. “This wide variability of outcomes induces an incentive that favors certain types of portfolios.”
The study by analyst Michael Roberson said that “a re-examination of the calibration of SA-CCR might be justified with a view to reducing its variability.”
Basel should reassess leverage standard on bank-traded derivatives, CFTC study says
21 August 2018 7:26am