A bulletin describing the notice of proposed rulemaking on an updated framework for measuring derivative counterparty credit exposure by the three federal banking agencies was published Monday by the regulator of national banks.
The Office of the Comptroller of the Currency (OCC) published bulletin 2018-45 on the proposal, also published Monday in the Federal Register, by the OCC, the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC). The proposal, issued for a 60-day comment period, would replace the current exposure methodology (CEM) as an additional methodology for calculating advanced approaches total risk-weighted assets under the capital rule.
The OCC bulletin noted that the proposal would:
- require advanced approaches banks to use the standardized approach for counterparty credit risk (SA-CCR) framework for measuring credit risk for derivatives exposures in place of CEM;
- permit other banks to use SA-CCR in place of the existing current exposure methodology;
- make technical amendments to the capital rule with respect to certain derivatives transactions.
Bulletin: Notice of Proposed Rulemaking
RR: Banking agencies propose new standards for measuring counterparty credit risk in derivative contracts (Oct. 30, 2018)