BASEL, Switzerland–The Basel Committee has revised the leverage ratio treatment of client cleared derivatives to generally align it with the standardized approach measuring counterparty credit risk exposures (SA-CCR) as used for risk-based capital requirements, according to the World Council of Credit Unions, which supported the move.
WOCCU said it encouraged the approach to the leverage ratio in order to help preserve community-based financial institutions’ access to interest-rate derivatives in order to hedge interest rate risk.
“Continued access for credit unions and other community based-depository institutions to fair and affordable interest rate swaps and caps promotes safety and soundness by helping community-based institutions hedge interest rate risks related to fixed-rate mortgage loans held in portfolio and similar fixed-rate investments,” the World Council said.
WOCCU said it continues to have concerns that the SA-CCR may itself have capital requirements for banks involved in client clearing of derivatives that are too high for credit unions and other community-based financial institutions to be able to maintain access to interest rate derivatives at fair rates and will continue to monitor this situation.
The revised standard can be viewed here.