Tuesday October 1 2013
News Source: Global Exchanges
Focus: Credit Rating
Type: General
Country: International
Link: http://www2.isda.org/attachment/NTkzMQ==/BCBS%20254%20-%20NIMM%20-%20Industry%20Response.pdf
The International Swaps and Derivatives Association, Inc. (‘ISDA’), the Institute of International Finance (‘IIF’) and the Global Financial Markets Association (‘GFMA’) have responded to the Basel Committee on Banking Supervision (‘BCBS’) Consultative Document ‘The non-internal model method for capitalising counterparty credit risk exposures (NIMM)`, dated June 2013.
The Associations welcome the BCBS’s consultative document as a significant step in addressing many of the long standing concerns regarding the Current Exposure Method (‘CEM’). As an alternative to CEM, it is clear that NIMM has the potential to perform better as a measure of exposure. However, there are certain products and circumstances where the Industry is concerned that NIMM does not appropriately recognise the reality of some collateral and netting arrangements thus resulting in disproportionately high levels of exposure.
In their response, the Associations have detailed their specific concerns, with examples, in attached documentation and provided suggestions on how to address these concerns and improve the risk sensitivity of NIMM.
Click on the above link for more details.