On July 6, MFA submitted with AIMA, the Commodity Markets Council, the Investment Association, and SIFMA’s Asset Management Group (AMG) its joint response to the Basel Committee on Banking Supervision (BCBS). The letter regards the BCBS’s Consultative Document on Revisions to the Basel III leverage ratio framework.
In the letter, MFA and the other buy-side trade associations expressed shared concerns that the standardized approach for measuring counterparty credit risk exposures (or SA-CCR), as proposed in the Consultative Document, does not allow any offsetting of a clearing member’s potential future exposure with the initial margin (IM) posted by its clearing clients. This formulation should be revised to allow such an offset. Otherwise, central clearing of derivatives will become increasingly less accessible and affordable for end users, as supported by quantitative survey data previously presented to BCBS by SIFMA AMG. Also, the ability of central counterparties to port customer positions of failing clearing members to non-defaulting clearing members may become increasingly constrained, with potentially adverse systemic consequences.
