The Federal Reserve Board has proposed a rule on single
counterparty credit limits (SCCL) of large banking
organisations. While it broadly follows the Basel Committee's
international large exposure framework, there are key
differences within the text.
The latest proposals take aim at large credit exposures,
particularly between larger and systemically important
Those exposures, in times of distress, can undermine
financial stability by linking the fate of a struggling bank to
otherwise healthy banks. The Fed's report, Calibrating the
Single-Counterparty Credit Limit between Systemically Important
Financial Institutions, was released on March 4.
"We are determined to do as much as we can to reduce or
eliminate the threat that trouble at one big bank will bring
down other big banks," said Federal Reserve Board chair Janet
Yellen at the report's launch.
The proposed rule, which would constitute Dodd-Frank
implementation, broadly follows the Basel Committee's
international large exposures framework. That...