WFE Response to US Authorities' Notice of Proposed Rulemaking on Standardised Approach for Calculating the Exposure Amount of Derivatives

The WFE, has responded to three US federal banking agencies on a proposed rule to update their standards for how firms measure counterparty credit risk posed by derivative contracts.

The proposed rule, jointly issued by the Federal Reserve Board, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), would update the way US authorities measure derivatives counterparty risk along the lines of the Basel Committee’s SA-CCR approach.

The WFE has responded to the consultation as follows:

• The WFE supports a policy framework that allows for accessible, competitive and vibrant derivatives markets - and one that also ensures the soundness of banks (including the prevention of excessive leverage);
• The WFE has long advocated for the recognition of client margin offsets, and encourages international proposals to address the leverage ratio treatment of a segregated client margin; and
• The WFE supports the US authorities’ efforts towards the implementation of the standardised approach for measuring counterparty credit risk (SA-CCR); this should be done in a manner that incorporates margin offsets.