2018-24924: Standardized Approach for Calculating the Exposure Amount of Derivative Contracts

Summary

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (together, the agencies) are inviting public comment on a proposal that would implement a new approach for calculating the exposure amount of derivative contracts under the agencies' regulatory capital rule. The proposed approach, called the standardized approach for counterparty credit risk (SA-CCR), would replace the current exposure methodology (CEM) as an additional methodology for calculating advanced approaches total risk-weighted assets under the capital rule. An advanced approaches banking organization also would be required to use SA-CCR to calculate its standardized total risk-weighted assets; a non-advanced approaches banking organization could elect to use either CEM or SA-CCR for calculating its standardized total risk-weighted assets. In addition, the proposal would modify other aspects of the capital rule to account for the proposed implementation of SA-CCR. Specifically, the proposal would require an advanced approaches banking organization to use SA-CCR with some adjustments to determine the exposure amount of derivative contracts for calculating total leverage exposure (the denominator of the supplementary leverage ratio). The proposal also would incorporate SA-CCR into the cleared transactions framework and would make other amendments, generally with respect to cleared transactions. The proposed introduction of SA-CCR would indirectly affect the Board's single counterparty credit limit rule, along with other rules. The Office of the Comptroller of the Currency also is proposing to update cross-references to CEM and add SA-CCR as an option for determining exposure amounts for derivative contracts in its lending limit rules.

The agency’s own summary, as published.

What this changes

Amends 4 parts of the Code of Federal Regulations — the standing rules this notice rewrites.

• 12 CFR 3 Capital Adequacy Standards
• 12 CFR 32 Lending Limits
• 12 CFR 217 Capital Adequacy of Bank Holding Companies, Savings and Loan Holding Companies, and State Member Banks (Regulation Q)
• 12 CFR 324 Capital Adequacy of FDIC-Supervised Institutions