An Analysis of the Basel Committee’s “Revisions to the Standardised Approach for Credit Risk, second consultation paper”

January 2016

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The Basel Committee on Banking Supervision has released “Revisions to the Standardised Approach for credit risk, second consultation paper,” a new set of proposals for how banks measure their internal risk. These rules are central to how bank risk management works and have broad impacts for all financial markets. As with any new regulation there are winners and losers already evident from this document, and identifiable reasons for why market participants will elect certain strategies over others going forward.

This report is a reading of the Revisions second consultation paper for market practitioners. It aims to interpret the major provisions for buy-side and other market participants lending and borrowing securities, engaged in repo and receiving or providing leverage.

Recommended readers for this report include hedge funds, prime brokers, beneficial owners, cash providers in repo, bank dealers, agent lenders, technology firms and consultancies.

This report is part of the Finadium Executive Briefing series, providing briefings and analysis to the financial markets industry.

This report is 14 pages.

■ Executive Summary

■ Why This Document Matters

■ A Practitioner’s Guide to the Standardised Approach
– Bank-to-Bank Credit Risk
– Bank-to-Corporate Credit Risk (Including the Buy- side)
– The Benefits of Collateral
– An Important Change for Agent Lenders

■ Other Business Considerations
– Hedge Funds as Broker-Dealers
– Indemnification for Beneficial Owners
– From Basel to National Regulators

■ About the Author

■ About Finadium


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