tracker

SA-CCR: Revision of exposure calculation

In March 2014, the Basel Committee on Banking Supervision issued a consultative document outlining a new method to assess counterparty credit risk of derivative transactions: („The standardised approach for measuring counterparty credit risk exposures“, in short „SA-CCR1“). The new approach will replace the widely used Current Exposure Method (CEM) and the less common Standardised Method (SM). It applies to Pillar I RWA calculations, and is discussed to be used in respect to large exposures and the leverage ratio. In addition, the new assessment method should be considered for internal limit management purposes and in the ICAAP.

Compared to CEM, SA-CRR is generally more risk sensitive, better reflects offsetting of transactions in the same asset class and legal netting agreements. SA-CCR additionally improves the recognition of collateral on derivatives exposures.

In addition to bilateral transactions, SA-CCR will also be applied to assess exposures to central counterparties (CCPs), particularly for exposure calculations under the capital adequacy requirements for default fund contributions of direct members.

The Basel Committee’s proposals for capital requirements for bank exposures to CCPs (BCBS282) and the introduction of SA-CCR (BCBS279) are advanced and an implementation in European regulations is expected within the following months.

We can assist you

Please feel free to contact us to discuss opportunities for your institution in relation to SA-CCR:

  • RWA reduction due to a more effective recognition of netting benefits and by fully reflecting the effect of collateral
  • Implications on the leverage ratio of your institute
  • Opportunities that SA-CCR provides for a more risk sensitive view on portfolio effects for managing counterparty credit risks


The d-fine “SA-CCR tool” can provide a quick check to understand the implications of SA-CCR on your derivatives exposures.

 

 

Please contact us to understand how your RWA will be impacted by the new method, what the main drivers are for the change and how you can effectively reduce your exposure.

For detailed information about our references and our approach to SA-CCR, please call +49 69 907370 or email info@remove-this.d-fine.de, with the subject "SA-CCR".

 

 


1 During the development phase the approach was referred to as the „Non-internal model method“ („NIMM“).