Newsletter January 2011: Capital rules proposed for banks’ swap clearing risks

BASEL – A consultation on the level of capital that banks should hold against their exposures to central counterparties (CCPs), which will, under regulators’ plans, clear an increasing volume of derivative transactions, was announced by the Basel Committee in late December.* Banks are being strongly incentivised to clear their over-the-counter (OTC) derivative contracts through CCPs in an effort to reduce risks in this vast market. Reforms are being undertaken on both sides of the Atlantic with the aim of reducing counterparty and operational risks.