Key points from the final single counterparty credit limits rule

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On June 14, the Federal Reserve Board (Fed) released its long awaited final rule to establish single-counterparty credit limits (SCCL), following almost seven years of proposals and reproposals. SCCL are intended to reduce systemic risk by limiting a bank’s credit exposure to any single counterparty as a percentage of that bank’s capital, but the most recent 2016 reproposal presented numerous operational issues for implementing these limits. In the final rule, the Fed addressed a large number of industry concerns and comments, particularly with respect to certain key definitions, operational issues, and compliance requirements.

While banking organizations will welcome the fact that the Fed have made feasible what was once an infeasible rule, they should not underestimate the operational challenges needed to comply with the rule’s requirements.

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A publication of PwC's financial services regulatory practice.

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Julien Courbe

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