Regulatory Alerts2014-11-30
Derivatives Sound Practices Guideline
The Office of the Superintendent of Financial Institutions issued this guideline to establish comprehensive risk management expectations for federally-regulated financial institutions conducting derivatives activities. Institutions must integrate robust valuation, market risk measurement, and counterparty credit limit frameworks into their overall risk appetite while ensuring proper segregation of duties and legal enforceability for netting and margining arrangements. The document further mandates centralized clearing through qualifying central counterparties where practicable, aligning bilateral transactions with Basel III capital requirements and introducing specific capital incentives to reduce systemic risk.
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