Bloomberg News

Banks Face Basel Group Capital Rules Over Clearinghouse Risks

November 02, 2011

Nov. 2 (Bloomberg) -- Global finance regulators published draft rules laying out how much capital banks should hold to guard against the risk of a clearinghouse defaulting on a derivatives trade.

Banks should hold reserves equivalent to 2 percent of their trades with a clearinghouse, with the value of the trades weighted in line with how much risk they involve, the Basel Committee on Banking Supervision said in a statement on its website. “The committee will finalize the rules around year end and expects that they will be implemented in its member jurisdictions by January 2013.”

The committee will also ask for comment on how much a bank should contribute to so-called default funds that are maintained by clearinghouses. Such funds are tapped when a lender or another member of a clearinghouse can’t meet its obligations. Banks will have until Nov. 25 to respond to the Basel committee’s plans.

The Group of 20 nations is encouraging greater use of clearinghouses in a bid to cut some of the risks attached to derivatives trading. Regulators have in turn called for them to face tougher rules because of the risk that the collapse of a clearing firm could damage the global financial system.

--Editors: Christopher Scinta, Anthony Aarons

To contact the reporters on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.


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