Is single-counterparty credit limits Volcker II?

Author: Danielle Myles | Published: 1 May 2012

Single-counterparty credit limits (SCCL) is US banks’ top concern under Dodd-Frank at present, with a bankers’ counsel describing it as Volcker II.

The Federal Reserve’s proposed restrictions to SCCL have been deemed an overcorrection which could cripple US liquidity.

"As drafted, it requires major US banking entities to significantly overstate their credit exposure to other financial institutions which would, I think everyone fears, result in a pullback on lending and providing customer-oriented access to derivative clients," a bankers’ counsel said.

"This in a way is Volcker II. As written, it would have a very contracting effect on the market," he added.

The Federal Reserve’s suggested SCCL changes implement section 165(e) of Dodd-Frank and aim to limit the concentration of risk in the financial system...