On March 14, ISDA and the Association for Financial Markets in Europe (AFME) submitted a joint response to the European Banking Authority’s (EBA) consultation on draft regulatory technical standards (RTS) relating to specific elements of the standardized approach for counterparty credit risk (SA-CCR).
In the response, the associations highlight their concerns about the fragmentation of regulatory requirements relating to SA-CCR across jurisdictions and believe it is crucial to perform a holistic review of the SA-CCR framework at the international level to improve SA-CCR risk sensitivity and minimize the risk of market fragmentation.
The draft RTS provides options to calculate the supervisory delta of commodities. However, there are instances where negative values of the instrument or risk factors underlying an option contract can occur in other asset classes as well. The associations recommend an extension to the application of the λ shift to all asset classes. Furthermore, the associations propose the use of actual front office (FO) deltas or deltas derived from FO prices, such as in the Fundamental Review of the Trading Book. They also highlight that US agencies have proposed an extension of the λ shift to all asset classes, not only commodities. The associations recommend the EBA aligns with the US agencies and extends the scope to all asset classes.
Documents (1) for ISDA Responds to EBA on Standardized Approach for Counterparty Credit Risk
Latest
A Positive Step to Improve the FRTB in the EU
As the Basel III capital reforms are finalized for implementation in key jurisdictions, ISDA is maintaining a laser focus on making sure the rules are robust and risk-appropriate. Simply put, if capital requirements are set disproportionately high, this will have...
Trading Book Capital: Scott O'Malia Remarks
Trading Book Capital: Policy Challenges for the EU 2024-2029 Mandate March 25, 2025 Welcoming Remarks Scott O’Malia ISDA Chief Executive Officer Good morning and welcome to ISDA’s trading book capital event. It’s great to be here in Brussels and...
Setting Out the Value Proposition of Derivatives
History enthusiasts may have heard of the Code of Hammurabi, an early legal text from ancient Mesopotamia, carved into a stone slab about 3,700 years ago. The code covers everything from property rights to divorce, but it also recognizes the...
Appropriate Capital Rules Critical for Markets
“Setting capital requirements for globally active banks is a fine balancing act. As regulators learned during the global financial crisis, insufficient capital creates vulnerabilities in the banking sector that can have damaging consequences in times of stress. However, if banks...