MFA and SIFMA AMG submitted a joint comment letter in response to the Basel Committee on Banking Supervision’s (BCBS) consultative document on the leverage ratio treatment of client cleared derivatives.
Among the three options that the BCBS is considering for revising the leverage ratio, this letter endorses Option 3. Option 3 would align the leverage ratio’s treatment of client cleared derivatives with that of the standardized approach for measuring counterparty credit risk exposures (known as SA-CCR) in risk-based capital requirements, with the effect of allowing both cash and non-cash forms of client initial margin and variation margin to offset the bank’s replacement cost and potential future exposure.
