• Basel Large Exposures Framework: Basel Committee Publishes Standards for the Supervisory Framework for Measuring and Controlling Large Exposures
  • May 8, 2014
  • Law Firm: Sullivan Cromwell LLP - New York Office
  • The Basel Committee on Banking Supervision (the “Basel Committee”) recently published final standards for the supervisory framework for measuring and controlling large exposures (“LE Framework”) of internationally active banking organizations. The LE Framework, like loan-to-one-borrower limits for banks, is used to identify, measure, and limit, as a percentage of an institution’s capital, exposures to a counterparty. It also is designed in part to address interconnectedness among systemically important financial institutions. The LE Framework is similar to the single counterparty credit limit (“SCCL”) under Section 165(e) of the Dodd-Frank Act, which requires the Board of Governors of the Federal Reserve System (“Federal Reserve”) to adopt rules imposing a limit on exposure s to a single counterparty by banking organizations with $50 billion or more in consolidated assets and nonbank financial institutions designated by the Financial Stability Oversight Council (“covered companies”). The Federal Reserve proposed rules to implement the SCCL (“Proposed SCCL Rule”) in December 2011 and December 2012 along with other enhanced prudential standards for covered companies, but the SCCL was not included with the final enhanced prudential standards recently issued by the Federal Reserve. The Federal Reserve has indicated that it is coordinating the final SCCL with the LE Framework. The annex to this memorandum provides a detailed comparison of the Proposed SCCL Rule and the LE Framework.