After two rounds of public consultation, and discussions with the Committee on Payment and Settlement Systems (CPSS) and the International Organisation of Securities Commissions (IOSCO), the Basel Committee has issued today, as part of Basel III, interim rules for capitalising exposures to CCPs that are intended to come into effect as of January 2013.

The Committee's framework for capitalising exposures to CCPs builds on the new CPSS-IOSCO Principles for Financial Market Infrastructures (PFMIs), which are designed to enhance the robustness of the essential infrastructure, including CCPs.

In addition, the interim rules published today allow banks to choose from one of two approaches for determining the capital required for exposures to default funds: (i) a risk sensitive approach on which the Committee has consulted twice over the past years, or (ii) a simplified method under which default fund exposures will be subject to a 1250% risk weight subject to an overall cap based on the volume of a bank's trade exposures.

Acknowledging the need to create incentives to increase the use of central counterparties, even where this is done via indirect clearing, the Committee has included in the rules provisions on indirect clearing that allow clients to benefit from the preferential treatment for central clearing.

The Committee says it intends that interim rules allow for a full implementation of Basel III, but says it recognises that additional work is needed to develop an improved capital framework.

Further work in this area is planned for 2013. Stefan Ingves, chairman of the Basel Committee on Banking Supervision and Governor of Sveriges Riksbank, noted that "capital requirements for bank exposures to CCPs is one of the final pieces of the Basel III capital framework, and we are pleased to have the interim rules established.

The Committee adds that all components of the G20 reform agenda in relation to OTC derivatives are yet to be finalised.

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