Bank exposure to clearing house outside 15% norm

 Banks’ exposure to a qualifying clearing house would be kept outside the limit of 15 per cent of their capital funds applicable to a single counterparty, the Reserve Bank said on Tuesday.

“...as an interim measure, a bank’s clearing exposure to a Qualifying Central Counterparty (QCCP) will be kept outside of the exposure ceiling of 15 per cent of its capital funds applicable to a single counterparty,” the RBI said in a notification.

The exposure limit applicable to a single borrower or counterparty is 15 per cent of the capital funds of the bank.

QCCP is a licensed clearing house, technically known as Central Counterparty (CCP) that acts as a facilitator between counterparties for contracts traded in one or more financial markets.

Clearing exposure would include trade exposure and default fund exposure, RBI said.Other exposures to QCCPs such as loans, credit lines, investments in the capital of CCP, liquidity facilities, will continue to be within the existing exposure ceiling of 15 per cent of capital funds to a single counterparty, it added further.

“However, all exposures of a bank to a non-QCCP should be within this exposure ceiling of 15 per cent,” it clarified. 

Further, in case the status of qualifying clearing house is changed, it would be considered a non-QCCP and exposure norms would be as applicable to non-QCCPs.

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