Confusion over CCP default fund charge

The Basel Committee on Banking Supervision has proposed new capital charges for bank exposures to central counterparty (CCP) default funds, with the final rules expected to be drawn up by September. But is the timeline too ambitious, and who will calculate the so-called hypothetical capital for CCPs? By Joel Clark

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Of all the working groups that research and draft standards for consideration by the Basel Committee on Banking Supervision, the risk management and modelling group (RMMG) has had one of the heaviest workloads over the past two years. Charged with drawing up new standards to capture counterparty credit risk in 2009, the group spent much of last year adjusting its proposals in response to industry criticism, particularly the controversial capital charge for credit value adjustment (CVA).

While

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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