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Capital Treatment in Support of Central Clearing
Treasury recommends that regulators properly balance the post-crisis goal of moving more derivatives into central clearing with appropriately tailored and targeted capital requirements.
- As a near-term measure, Treasury reiterates the recommendation of the Banking Report and calls for the deduction of initial margin for centrally cleared derivatives from the SLR denominator; and recommends a risk-adjusted approach for valuing options for purposes of the capital rules to better reflect the exposure, such as potentially weighting options by their delta.
- Beyond the near term, Treasury recommends that regulatory capital requirements transition from CEM to an adjusted SA-CCR calculation that provides an offset for initial margin and recognition of appropriate netting sets and hedged positions.
- In addition, Treasury recommends that U.S. banking regulators and market regulators conduct regular comprehensive assessments of how the capital and liquidity rules impact the incentives to centrally clear derivatives and whether such rules are properly calibrated.
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