SA-CCR: Impact on the US

The Basel Committee on Banking Supervision (BCBS) designed the new standardized approach to counterparty credit risk (SA-CCR) to replace the current exposure method (CEM) in the Basel capital framework. In December 2018, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) published their proposed version of SA-CCR for the US market.

On March 18, ISDA, the Securities Industry and Financial Markets Association, the American Bankers Association, the Bank Policy Institute and FIA submitted a joint comment letter to the US regulatory agencies. In general, the associations support the move from CEM to SA-CCR given its greater sensitivity to risk. However, the rule as currently proposed by US agencies goes beyond the global standard set by the BCBS and would result in higher capital charges for institutions subject to US rules. This would create an unlevel playing field and would adversely affect the ability of commercial end users to hedge risk.

This paper outlines why SA-CCR is important, and summarizes the results of an in-depth quantitative impact study (QIS) conducted by the industry associations with input from nine financial institutions that account for 96% of total derivatives notional outstanding at the top 25 bank holding companies. As explained in the paper, the QIS highlights the need for changes in the calibrations within the proposed US rule to avoid negative impacts on the liquidity and functioning of the US derivatives market.

 

Documents (1) for SA-CCR: Impact on the US

ISDA Omnibus Canadian Representation Letter

On September 2, ISDA published the Omnibus Canadian Representation Letter, which combines previously published representation letters drafted to assist firms in compliance with Canadian trade reporting, business conduct, regulatory margin and clearing classification rules. The Omnibus Canadian Letter is designed...

Joint Response on Cross-margining

On August 31, ISDA and FIA submitted a letter to the US Commodity Futures and Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) on the agencies’ joint request for comment on the implementation of portfolio margining and cross-margining...

Response to SEC on FICC Guaranty Fund

On September 1, ISDA and FIA submitted a joint response to the US Securities and Exchange Commission (SEC), supporting the Fixed Income Clearing Corporation’s (FICC) proposal to establish a dedicated guaranty fund at its government securities division (GSD). FICC had...