Banks feel chill of exposure from Fed’s SCCL
US rules on counterparty credit limit pose challenges for risk and regulatory teams despite proposed delay, explains expert
Basel’s large exposures framework is a central plank of regulatory efforts to prevent concentration of risk between big banking organisations and their counterparties. The objective is to ensure financial institutions extend a safe level of credit to a single counterparty.
That raises a question: how can authorities put a number on safe?
The US Federal Reserve has come up with two numbers: 15% and 25%. In the US, large banks must not take exposure to any one entity that adds up to more than 25
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