Counterparty credit concerns

Despite such regulatory interest, however, the new Basel Accord will not affect capital requirements for derivatives counterparty credit risk. In particular, the old ‘add-on’ approach of calculating fixed loan-equivalent exposures by adding notional percentages for individual transactions on to mark-to-market values will stay in place. This approach has been criticised by leading financial institutions, which have lobbied for a capital treatment that reflects their own best practice

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