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II Structural Elements of Clearing, 9 Capital Requirements for Bank Exposures to CCPs

Marc Peters

From: Clearing OTC Derivatives in Europe

Edited By: Bas Zebregs, Victor de Seriere, Rezah Stegeman, Patrick Pearson

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 03 March 2024

Subject(s):
Credit risk — Derivatives — Central counterparty (CCP) — Balance sheet

This chapter focuses on the bank capital requirements that apply to exposures to central clearing counterparties (CCPs), in particular in the context of the central clearing mandate for over-the-counter (OTC) derivatives. It begins by explaining the prudential treatment of derivative exposures towards CCPs and how it acknowledges the market structure, the clearing value chain, and the way market participants, including banks, access CCPs. The chapter explains how the determination of capital requirements adjusts to the role of a bank in a cleared transaction, including in multi-level client structures, and to the risk profile of CCPs. The chapter then continues with the treatment of exposures in the context of uncleared transactions and further provides an overview of other areas of the prudential framework for banks that have been influenced by the central clearing mandate. It concludes with some considerations on the future central clearing landscape.

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