Non-netting status denies capital boost for Chinese banks

Reliable close-out netting could cut China’s SA-CCR capital requirements by around 20%

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Missed deadline: China is one of only eight jurisdictions to have implemented SA-CCR so far
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China’s largest banks could reduce the capital held against derivatives counterparty credit risk by as much as a fifth, following the implementation of new global rules on January 1, but only if regulators bolster netting laws towards international standards.

Close-out netting, which lets derivatives dealers collapse offsetting trades into a single net payment if a counterparty defaults, instead of making and receiving a series of margin calls on gross exposures, is crucial for China’s largest

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