The Federal Reserve has decided to rescind a technical change in the way it calculates the CCAR stress testing calculations for large banking organizations, a decision that averts a major increase in the amount of capital required for client clearing.
The change in policy affects the information that banks are required to report to the Fed in their FR Y-14 reports. The reports are used to calculate how much capital banks need to hold in case of a market shock that causes a large counterparty default.
In August, the Fed revised the instructions for this report and advised banks to include cleared swaps and exchange-traded futures and options in their counterparty exposure calculations starting in January.
Although these changes were introduced as “clarifications” to the reporting requirements, FIA and other industry groups raised concerns about the potential impact on client clearing and questioned why such an important change in policy was not undertaken through the normal rulemaking process.
In late October, the Fed decided to rescind these changes. The Fed re-issued the reporting instructions and related documents to clarify that client-cleared exposures do not need to be included.