BPI, Trades Submit Letter on SA-CCR Final Rule Drafting Issues

BPI, Trades Submit Letter on SA-CCR Final Rule Drafting Issues

On March 30, BPI, along with the International Swaps and Derivatives Association (ISDA), the Securities Industry and Financial Markets Association (SIFMA), and the Futures Industry Association (FIA), submitted a letter to the Federal Reserve, OCC, and FDIC highlighting a number of drafting concerns with the text of the agencies’ final Standardized Approach for Counterparty Credit Risk (SA-CCR) rule. The drafting concerns reflect inconsistencies within the rule text itself that create an ambiguity with respect to the application of specific rules within the computation of exposure, or between the rule text and the aims of the rule specified in the preamble. Specifically, the letter identifies issues related to: i) the definition of the number of margin disputes required to double the Margin Period of Risk (MPoR) in the exposure calculation; ii) the definition of EADi in the Kccp capital calculation; iii) a lack of rule text relating to the optional exclusion of Sold Credit Derivatives from the PFE component of the supplementary leverage exposure amount; and iv) a lack of a reference to SA-CCR under the simple and advanced CVA Approaches. In a follow-up letter submitted May 12, the trades identified further concerns related to bankruptcy remoteness of collateral posted by clearing member firms to CCPs and determination of PFE in Supplementary Leverage Ratio (SLR), and noted that the previously identified lack of reference to SA-CCR under the simple and advanced CVA Approaches was addressed in the final published rule text.

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The views expressed do not necessarily reflect those of the Bank Policy Institute’s member banks, and are not intended to be, and should not be construed as, legal advice of any kind.