Measuring and controlling large exposures - consultative document issued by the Basel Committee
The Basel Committee on Banking Supervision has today published a proposed supervisory framework for measuring and controlling large exposures.
The Basel Committee on Banking Supervision has today published a proposed supervisory framework for measuring and controlling large exposures. The proposed new standard aims to ensure greater consistency in the way banks and supervisors measure, aggregate and control exposures to single counterparties. Acting as a backstop to risk-based capital requirements, the standard would supplement the existing risk-based capital framework by protecting banks from substantive losses caused by the sudden default of a counterparty or group of connected counterparties. The consultative paper published today would replace the Basel Committee's 1991 guidance Measuring and controlling large credit exposures.
The proposed standard focuses on the concentration risk associated with the default of single private sector counterparties and would also apply to exposures to a group of connected counterparties. Its scope is comprehensive, covering direct exposures to counterparties across all operations and books, as well as exposures to providers of credit protection. By extending the scope of coverage to exposures to funds, securitisation structures and collective investment undertakings, the Committee seeks to address concerns related to the shadow banking system. The Committee also aims to limit contagion between global systemically important banks (G-SIBs) by proposing a tighter limit on exposures between G-SIBs.
The Basel Committee welcomes comments on this consultative document. Comments on the proposals should be submitted by Friday 28 June 2013 by e-mail to: baselcommittee@bis.org. Alternatively, comments may be sent by post to: Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland. All comments may be published on the website of the Bank for International Settlements unless a comment contributor explicitly requests confidential treatment.