US Single Counterparty Credit Exposure Limit
US Federal Reserve propose to introduce rules to address the risk associated with excessive credit exposures of large banking organizations to a single counterparty. The proposed rules will apply to US bank holding companies and foreign banking organizations with a banking presence in the US, including any intermediate U.S. holding company that have $50 billion or more in total consolidated assets. These impact regulatory calculations and reporting requirements covered by Lombard Risk AgileREPORTER.
The proposed Single Counterparty Credit Exposure Limit (SCCL) standard is based on the Basel III large exposures framework but stricter. The proposed limits are tailored to increase in stringency as the systemic footprint of a firm increases:
- A global systemically important bank, or G-SIB, would be restricted to a credit exposure of no more than 15 percent of the bank’s tier 1 capital to another systemically important financial firm, and up to 25 percent of the bank’s tier 1 capital to another counterparty;
- A bank holding company with $250 billion or more in total consolidated assets, or $10 billion or more in on-balance-sheet foreign exposure, would be restricted to a credit exposure of no more than 25 percent of the bank’s tier 1 capital to a counterparty;
- A bank holding company with $50 billion or more in total consolidated assets would be restricted to a credit exposure of no more than 25 percent of the bank’s total regulatory capital to another counterparty;
- And bank holding companies with less than $50 billion in total consolidated assets, including community banks, would not be subject to the proposal.
The proposed SCCL standard would force banks to recalculate their credit exposure for securities lending transactions. The Federal Reserve will require banks to use the collateral haircut approach to calculate credit exposure for securities financing transactions.
Lombard Risk AgileREPORTER US reporting:
- Support for Federal Reserve, Treasury and Commerce requirements with various submission methods including XML, XBRL etc.
- Ongoing maintenance & implementation ensuring you are always up to date
- Delivers embedded regulatory reporting production process, reducing risk
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