As urged by WOCCU, the Basel Committee revised the leverage ratio treatment of client cleared derivatives to generally align it with the standardized approach measuring counterparty credit risk exposures (SA-CCR) as used for risk-based capital requirements.
WOCCU encouraged this approach to the leverage ratio in order to help preserve community-based financial institutions’ access to interest-rate derivatives in order to hedge interest rate risk.
Continued access for credit unions and other community based-depository institutions to fair and affordable interest rate swaps and caps promotes safety and soundness by helping community-based institutions hedge interest rate risks related to fixed-rate mortgage loans held in portfolio and similar fixed-rate investments.
WOCCU continues to have concerns that the SA-CCR may itself have capital requirements for banks involved in client clearing of derivatives that are too high for credit unions and other community-based financial institutions to be able to maintain access to interest rate derivatives at fair rates and will continue to monitor this situation.
The revised standard can be viewed here.