A joint proposal from the US Federal Reserve, OCC and FDIC may allow certain banks to employ a revised approach to risk that may free up bank capital.
The Federal Reserve and two other agencies on Tuesday proposed a new approach meant to answer concerns that existing requirements ignore risk-reducing collateral and didn’t allow enough netting of derivatives contracts with similar risks. The new calculation, known as the “standardized approach for counterparty credit risk,” or SA-CCR, would be used in key capital measures, including how banks determine how much they need to offset risks and how close they’re getting to regulators’ leverage limits. Companies required to have the new method in place by July 1, 2020, are giant, global lenders identified as “advanced approaches” banks under capital rules. The proposal released for a 60-day public comment period also represents the U.S. answer to a global agreement at the Basel Committee on Banking Supervision in 2014.