• Print
  • Decrease text size
  • Reset text size
  • Larger text size

Standardized Approach For Counterparty Credit Risk

There has always been a lot of criticism around the existing non-model approaches (Current Exposure Method and Standardized Method) for calculating counterparty exposures for OTC derivatives, exchange-traded derivatives and long settlement transactions.  The regulation on SA-CCR, which will take effect in January 2017, will replace the existing non-model approaches, rectifying their short-comings. 

The 2008 financial crisis exposed a lot of insufficiencies in the current regulatory framework, from market risk to interest rate risk, and credit risk domains.  Basel committee has launched a series of initiatives to replace the existing regulations in those risk domains.  We have seen many recently-announced revised regulatory frameworks such as FRTB, IRRBB, BCBS 239, IFRS 9, and so on, with the purpose of improving banks’ resilience and capability to withstand stressed conditions.  SA-CCR regulation fundamentally changes the logic in calculating exposure, which has a strong implication to banks’ minimum required capital and business strategy. 

In this paper we will deep dive into the details of the SA-CCR approach and analyze how it will affect banks.

0 comment
Post a comment

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Enter the characters shown in the image.
Back to Top