Date: December 17, 2018
Description: Notice of Proposed Rulemaking
On December 17, 2018, the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System, and Federal Deposit Insurance Corporation (collectively, the agencies) published a notice of proposed rulemaking (NPR) to provide an updated framework for measuring derivative counterparty credit exposure. The proposed rule would replace the existing current exposure methodology (CEM) with the Standardized Approach for Counterparty Credit Risk (SA-CCR) for banks subject to the advanced approaches, while permitting smaller banks to use CEM or SA-CCR. SA-CCR is a more risk sensitive approach that better reflects industry practices of netting derivative contracts and exchanging margin.
Note for Community Banks
Under the proposed rule, community banks would have the option, but would not be required, to use the SA-CCR framework.
The proposed rule would
- require advanced approaches banks to use the 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.
Please contact Guowei Zhang, Risk Expert, Capital Policy Division, at (202) 649-7106; or Kevin Korzeniewski, Counsel, Chief Counsel’s Office, at (202) 649-5490.
Acting Senior Deputy Comptroller and Chief Counsel