Standardized Approach for Calculating the Exposure Amount of Derivative Contracts
| Citation | 85 FR 17721 |
| Record Number | 2020-06755 |
| Published date | 31 March 2020 |
| Section | Rules and Regulations |
| Court | The Comptroller Of The Currency Office,Treasury Department |
Federal Register, Volume 85 Issue 62 (Tuesday, March 31, 2020)
[Federal Register Volume 85, Number 62 (Tuesday, March 31, 2020)]
[Rules and Regulations]
[Pages 17721-17722]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06755]
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DEPARTMENT OF TREASURY
Office of the Comptroller of the Currency
12 CFR Part 3
[Docket ID OCC-2018-0030; RIN 1557-AE44]
FEDERAL RESERVE SYSTEM
12 CFR Part 217
[Regulation Q; Docket No. R-1629; RIN 7100-AF22]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 324
RIN 3064-AF43
Standardized Approach for Calculating the Exposure Amount of
Derivative Contracts
AGENCY: Office of the Comptroller of the Currency, Treasury; the Board
of Governors of the Federal Reserve System; and the Federal Deposit
Insurance Corporation.
ACTION: Notification.
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SUMMARY: In light of recent economic disruptions caused by the COVID-19
virus and recent volatility in U.S. financial markets, the Office of
the Comptroller of the Currency, the Board of Governors of the Federal
Reserve System, and the Federal Deposit Insurance Corporation
(collectively, the agencies) are issuing a document to allow depository
institutions and depository institution holding companies to implement
the final rule titled Standardized Approach for Calculating the
Exposure Amount of Derivative Contracts (SA-CCR rule) for the first
quarter of 2020, on a best efforts basis.
DATES: Effective March 31, 2020.
FOR FURTHER INFORMATION CONTACT:
OCC: Margot Schwadron, Director, or Guowei Zhang, Risk Expert,
Capital and Regulatory Policy, (202) 649-6370; or Carl Kaminski,
Special Counsel, Kevin Korzeniewski, Counsel, Daniel Perez, Senior
Attorney, Chief Counsel's Office, (202) 649-5490; the Office of the
Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219.
Board: Constance M. Horsley, Deputy Associate Director, (202) 452-
5239;
[[Page 17722]]
Teresa A. Scott, Manager, (202) 475-6316; Eusebius Luk, Senior
Financial Institution Policy Analyst I, (202) 452-2874; Division of
Supervision and Regulation; or Benjamin W. McDonough, Assistant General
Counsel, (202) 452-2036; Mark Buresh, Senior Counsel, (202) 452-5270;
Jonah Kind, Senior Attorney, (202) 452-2045; Legal Division, Board of
Governors of the Federal Reserve System, 20th and C Streets NW,
Washington, DC 20551. For the hearing impaired only, Telecommunication
Device for the Deaf, (202) 263-4869.
FDIC: Bobby R. Bean, Associate Director, [email protected]; Irina
Leonova, Acting Chief, Capital Strategies Section, [email protected];
Peter Yen, Senior Policy Analyst, [email protected], Capital Markets
Branch, Division of Risk Management Supervision, (202) 898-6888; or
Michael Phillips, Counsel, [email protected]; Catherine Wood, Counsel,
[email protected]; Supervision Branch, Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street NW, Washington, DC 20429.
SUPPLEMENTARY INFORMATION: The Office of the Comptroller of the
Currency, the Board of Governors of the Federal Reserve System, and the
Federal Deposit Insurance Corporation (collectively, the agencies)
recently adopted the final rule titled Standardized Approach for
Calculating the Exposure Amount of Derivative Contracts (SA-CCR
rule).\1\ The SA-CCR rule implements a new approach--the standardized
approach for counterparty credit risk (SA-CCR methodology)--for
calculating the exposure amount of derivative contracts under the
agencies' regulatory capital rule (capital rule). The SA-CCR rule also
revises other aspects of the capital rule related to total leverage
exposure (the denominator of the supplementary leverage ratio) and the
cleared transactions framework.
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\1\ See 85 FR 4362 (January 24, 2020).
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The agencies are permitting a banking organization the flexibility
to implement the SA-CCR rule, including the SA-CCR methodology and the
other amendments described in the SA-CCR rule, one quarter early and on
a best efforts basis if the banking organization chooses to do so.\2\
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\2\ The SA-CCR rule had an original effective date of April 1,
2020, the first day of the calendar quarter following publication in
the Federal Register, pursuant to 12 U.S.C. 4802(b)(1). Banking
organizations may elect to comply before the effective date pursuant
to 12 U.S.C. 4802(b)(2).
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Recent events have suddenly and significantly impacted financial
markets. The spread of the COVID-19 virus has disrupted economic
activity in many countries. In addition, financial markets have
experienced significant volatility. The magnitude and persistence of
the overall effects on the economy remain highly uncertain. The
notification should help to mitigate the impact of recent dislocations
in the U.S. economy as a result of COVID-19. By allowing early adoption
of the SA-CCR rule, the notification allows banking organizations to
implement the SA-CCR methodology's more risk-sensitive measurement of
the exposure amounts of derivative contracts one quarter earlier than
the SA-CCR rule provided. For purposes of any early adoption of the SA-
CCR rule, the agencies understand that banking organizations are in the
process of refining their systems to implement the SA-CCR rule and,
therefore, for purposes of the first quarter, early adoption would be
on a best efforts basis.
The SA-CCR rule was issued with an effective date of April 1, 2020.
The SA-CCR rule provides banking organizations the option to adopt the
SA-CCR methodology for derivative contracts beginning on April 1, 2020.
For advanced approaches banking organizations, adoption of the SA-CCR
methodology is mandatory beginning January 1, 2022. As a result, by no
later than January 1, 2022, advanced approaches banking organizations
must use the SA-CCR methodology for purposes of standardized total
risk-weighted assets and the supplementary leverage ratio, and must use
either the SA-CCR methodology or the internal models methodology for
purposes of advanced approaches total risk-weighted assets. The SA-CCR
rule provides non-advanced approaches banking organization the option
to adopt the SA-CCR methodology for purposes of standardized total
risk-weighted assets and, if applicable, the supplementary leverage
ratio, beginning April 1, 2020. As a result, banking organizations
could adopt the SA-CCR methodology as early as April 1, 2020, and
advanced approaches banking organizations are required to adopt the SA-
CCR methodology beginning January 1, 2022.
The SA-CCR rule also included several other amendments to the
capital rule that are effective as of April 1, 2020. These amendments
include, among others: (1) A 2 percent or a 4 percent risk-weight for
cash collateral posted to a qualifying central counterparty (QCCP)
subject to certain requirements; (2) the ability of a clearing member
banking organization to recognize client collateral posted to a central
counterparty (CCP) under certain circumstances; (3) a zero percent
risk-weight for the CCP-facing portion of a transaction where a
clearing member banking organization does not guarantee the performance
of the CCP to the clearing member's client; and (4) the ability of a
clearing member banking organization to apply a 5-day holding period
for collateral associated with client-facing derivatives for purposes
of the collateral haircut approach.
The agencies are allowing banking organizations to implement the
SA-CCR rule, including the SA-CCR methodology and the other amendments,
on a best efforts basis immediately. A banking organization that elects
to adopt the SA-CCR methodology must adopt the SA-CCR methodology for
all derivative contracts; it cannot implement the SA-CCR methodology
for a subset of its derivative contracts. However, a banking
organization may adopt some of the other amendments described in the
SA-CCR rule regardless of whether it chooses to early adopt the SA-CCR
methodology.\3\
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\3\ Certain of the other amendments, such as the ability of a
banking organization to use SA-CCR for the calculation of exposure
under the OCC's lending limits rule, are dependent on the banking
organization adopting the SA-CCR methodology.
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The agencies expect to make related amendments to the Call Report,
FFIEC 101, and FR Y-9C, as applicable, filed as of March 31, 2020, to
reflect this notification. These amendments will be addressed in a
separate Federal Register document. Adopting the SA-CCR rule on a best
efforts basis for the first quarter of 2020 is optional for all banking
organizations subject to the capital rule. The SA-CCR rule effective
date will remain April 1, 2020, and the mandatory compliance date will
remain January 1, 2022.
Morris R. Morgan,
First Deputy Comptroller, Office of the Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System.
Ann Misback,
Secretary of the Board.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on or about March 26, 2020.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2020-06755 Filed 3-30-20; 8:45 am]
BILLING CODE P
