Isda and BMA propose 35% charge for restructuring risk
The International Swaps and Derivatives Association (Isda) and the Bond Market Association (BMA) submitted a comment letter today to the Basel Committee on Banking Supervision in which they argued that, for the sake of capital calculations, loans hedged with credit default swaps (CDS) that do not protect against restructuring have restructuring risk equal to 35% of their default risk.
"[We provided] an estimate of how much capital being exposed to restructuring risk and being hedged to other types of default risk should attract under their IRB framework," says Emmanuelle Sebton, head of risk
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