Basel Committee Issues Paper On Capitalization Of Bank Exposures To Ccps

On December 20, 2010, the Basel Committee released a consultative paper, Capitalisation of bank exposures to central counterparties, which gives interested stakeholders an opportunity to comment on proposed regulatory capital adequacy rules relative to exposures to CCPs.

Under its proposals, the BIS would largely defer to the Committee on Payment and Settlement Systems (the CPSS) and the Technical Committee of IOSCO with respect to what constitutes a qualifying CCP. It notes that their review is continuing. Interestingly, the proposals would increase the capital charges on exposures to CCPs over that applicable under Basel ll. The theory would appear to be that capital exposures on OTC derivatives exposures are increasing more and that therefore the G20 mandate to encourage clearing through CCPs is still met.