Newsletter September 2012: BASEL – Global banking regulators have ruled that from January 2013 an amount equal to 2% of a bank’s exposure to certain central clearing counterparties (CCPs) will be added to the total risk-weighted assets of that bank for re

The Basel Committee of global banking supervisors issued the interim rule in July as part of the efforts by leaders of the Group of Twenty (G20) top economies to reduce the systemic risk in the financial system seen as inherent in the $650 trillion privately traded over-the-counter (OTC) derivatives markets. A G20 aim is the get the bulk of OTC trading cleared through CCPs. Clearing houses, an established feature of exchange-traded derivatives markets, stand as buyer to every seller and seller to every buyer in the market, thereby obviating the risk of loss to an individual trader arising from a counterparty default. The capital rule for banks is one of the final elements of the international Basel III bank capital and liquidity package that’s due to start coming into effect from January 2013.