FIA Endorses Latest Tranche of EC Proposals Detailing Capital Requirements

A recent EC publication called for an amendment of the Capital Requirements Directive, with several proposed changes.

The Futures Industries Association (FIA) has endorsed a recent string of proposals outlined in a European Commission’s (EC) directive detailing Capital Requirements Regulation with regard to the cleared derivatives industry, according to an FIA statement.

The EC’s publication called for an amendment to Capital Requirements Directive 2013/36/EU, which included multiple changes and provisions, as put forth by a unified panel of global organizations, including the Basel Committee on Banking Supervision.

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The publication is of particular interest to the cleared derivatives industry, which also details a comprehensive framework on affording better time constraints for the recognition of qualified central counterparties (QCCPs), as well as a new method for calculating the exposure value of derivatives transactions.

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Changes Pass First Hurdle

Additional areas of note that were addressed focused on changes to the capitalization of exposures to CCPs, and an offset for client initial margin when calculating leverage exposure for clearing members. With widespread approval from the FIA and other entities, the latest amendments can now move to the European Parliament and the Council for a full review and consideration through its co-decision procedure.

Walt Lukken
Walt Lukken

According to Walt Lukken, President and CEO of FIA, in a recent statement on the amendments: “We’re glad to see the EC recognizes that the leverage ratio without an appropriate offset for initial margin would disincentivize clearing.”

“Our markets are global and it’s critical that the Basel Committee and other international and national regulators take similar action. If not, central clearing, a pillar of financial reform, will suffer. We’re looking forward to reviewing this proposal in more detail and considering its impact on the listed and cleared derivatives industry,” he added.

The full publication from the EC’s proposals can be read in full by accessing the following link.

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