Banks tout alternative to calculate CCP default fund capital charge
Dealers push for a more risk-sensitive model, but regulators may opt to incorporate a new non-internal modelled approach into the existing hypothetical capital method
Derivatives dealers will today urge regulators to consider an alternative model to calculate the capital that banks must hold against their central counterparty (CCP) default fund exposures. The model is based on the incremental risk charge (IRC), introduced as part of Basel 2.5 to credit risk in the trading book, and will capture the risk of multiple clearing member defaults – something missing
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