BCBS D451
Definition
BCBS D451 is a document published by the Basel Committee on Banking Supervision on October 2018 in the Leverage Ratio category.
Title
Consulative document "Leverage ratio treatment of client cleared derivatives".
Abstract
A key element of the Basel Committee's post-crisis Basel III reforms is the introduction of a leverage ratio requirement. The leverage ratio complements the risk-based capital requirements by providing a safeguard against unsustainable levels of leverage and by mitigating gaming and model risk across both internal models and standardised risk measurement approaches. By design, the leverage ratio does not differentiate risk across different asset classes.
This consultative document seeks the views of stakeholders on whether a targeted and limited revision of the leverage ratio's treatment of client cleared derivatives may be warranted, based on the findings of the Committee's review of the impact of the leverage ratio on banks' provision of client clearing services and in consideration of key policy objectives of G20 Leaders both to prevent excessive leverage and improve the quality and quantity of capital in the banking system and to promote central clearing of standardised derivatives contracts.
Pending feedback provided in response to this consultation, the range of treatments that the Committee may consider include:
- no change to the current treatment;
- an amendment to the treatment of client cleared derivatives to allow cash and non-cash initial margin received from a client to offset the potential future exposure of client cleared derivatives; and
- alignment of the treatment of client cleared derivatives with the standardised approach for measuring counterparty credit risk exposures. This would have the effect of allowing both cash and non-cash forms of initial margin and variation margin received from a client to offset the replacement cost and potential future exposure amounts of client cleared derivatives.
The Committee also welcomes feedback on the merits of introducing a requirement for initial margin to be segregated in order for any amended treatment to apply. It also seeks views on forward-looking behavioural dynamics of the client clearing industry that might result from any amended treatment.
The Committee welcomes comments from the public on all aspects of the consultative document hereby Wednesday 16 January 2019. All comments will be published on the Bank for International Settlements website unless a respondent specifically requests confidential treatment.
Document Profile
- Publication Date: October 2018
- Publication Type: Consultative
- Publication Status: Closed
- Publication Category: Leverage Ratio
- Number of Pages: 11
- Keywords: Leverage Ratio
See Also
Disclaimers
For definitive information on regulatory matters always consult primary sources, especially where it concerns legally binding rules and regulations.
The above regulatory document abstract is quoted verbatim in this Open Risk Manual entry and provided free of charge for the convenience of all internet users. There is no explicit or implicit endorsement of this web service by the Bank of International Settlements. The copyright of the included material rests with the original authors (Links to the original texts are duly provided).
