Regulatory Alerts2022-03-28 | CBE3.1CBE Regulation Book 3.1 - Capital Adequacy Standard Credit Risks
Banks may be permitted to use their own credit assessment methodologies for determining the creditworthiness of their securities financing transactions counterparties, subject to certain conditions. These could include, but are not limited to, requiring banks to apply conservative and stable haircuts on the value of collateral, with a cap on how much they can discount based on market volatility; setting requirements for liquidity coverage ratios (LCRs) or net stable funding ratio (NSFRs) for securities financing transactions; ensuring that banks have sufficient capital to cover any risks involved in their SFT activities; and allowing banks to calculate the haircuts they apply to their own synthetic securities based on their internal models, as long as these are conservative and well-diversified.