Basel proposal to capitalise settlement risk ‘unnecessary’

In comment letters published last week, banks have taken issue with Basel Committee guidance that would capitalise post-execution exposure to settlement risk

A proposal by the Basel Committee on Banking Supervision that banks should hold capital against foreign exchange settlement risk has been branded unnecessary as a means of mitigating settlement risk, with banks suggesting a preference to focus on risk mitigation mechanisms rather than capitalisation.

The proposal was made in the seventh and final guideline of a revised set of supervisory guidance on managing settlement risk published by the Basel Committee in August. The document suggests banks