Banks feel chill of exposure from Fed’s SCCL

US rules on counterparty credit limit pose challenges for risk and regulatory teams despite proposed delay, explains expert

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Basel’s large exposures framework is a central plank of regulatory efforts to prevent concentration of risk between big banking organisations and their counterparties. The objective is to ensure financial institutions extend a safe level of credit to a single counterparty.

That raises a question: how can authorities put a number on safe?

The US Federal Reserve has come up with two numbers: 15% and 25%. In the US, large banks must not take exposure to any one entity that adds up to more than 25