World Federation of Exchanges responses to Basel Committee’s Leverage Ratio Consultation

The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, has published its response to the Basel Committee on Banking Supervision’sconsultation on the leverage ratio treatment of client cleared derivatives.

The WFE’s response can be summarised as follows:

  • The WFE supports a policy framework that allows for accessible, competitive and vibrant derivatives markets – and one that also ensures the soundness of banks (including the prevention of excessive leverage);
  • The WFE has long advocated for the recognition of client margin offsets, and welcomes the Basel Committee’s proposals to address the leverage ratio treatment of a segregated client margin; and
  • The WFE supports the Basel Committee’s efforts towards a coordinated implementation of the standardised approach for measuring counterparty credit risk (SA-CCR); this should be done in a manner that incorporates margin offsets.

Nandini Sukumar, CEO, WFE said: “The WFE’s response to this consultation reiterates our position on the issue of the treatment of segregated client margin under the leverage ratio. Global authorities have recognised the challenges associated with clearing member concentration. The proposals by the Basel Committee to allow segregated client margin offsets will support a coherent policy framework that addresses this risk management challenge.”

Today’s consultation response follows the WFE’s 7 September 2018 response to the four global standard-setting boards assessing the effectiveness of incentives to centrally clear over-the-counter (OTC) derivatives.

The full WFE response to the Basel Committee on Banking Supervision is here.

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