Divergences of local implementation timelines could have unintended knock-on effects on certain bank and bank-affiliated clearing members.
CCP12 – a global association of CCPs – has called for national regulatory authorities to coordinate globally on the implementation timelines of the Basel III standards.
In a policy perspective paper published on Monday (31 May), CCP12 asked for national authorities to also provide transitional arrangements such that foreign CCPs can continue to be treated as QCCPs (qualifying CCPs) under their bank and bank-affiliated clearing members’ local regulatory regimes, even if there are timing gaps in Basel III implementation.
The paper says diverging local implementation timelines of the Basel III standards could hinder the ability of banks to continue to be able to treat a foreign CCP as a QCCP relative to a CCP’s adoption of the SA-CCR (Standardized approach for counterparty credit risk) for calculating capital requirements.
“CCP12 is concerned that possible divergences of local implementation timelines could have unintended knock-on effects on certain bank and bank-affiliated clearing members, if they are unable to obtain a hypothetical capital requirement from CCPs that are domiciled in jurisdictions other than their own.”
Unless properly addressed, the timing gap for the implementation of the Basel III standards could result in certain clearing members (and their clients) facing potentially prohibitive capital charges for their cleared trades and default fund contributions compared to other clearing members of the same CCP, due to their applicable local regulatory regime, CCP12 says.
The Basel III standards, including the use of SA-CCR, have an implementation date of 1 January 2023.