Regulatory AlertsCapital Calculation for Bank Exposures to Central Counterparty Institutions
The Indonesian Financial Services Authority (OJK) issued Circular Letter No. 16/SEOJK.03/2023 to establish capital calculation standards for bank exposures to Central Counterparties (CCPs), aligning with Basel Committee on Banking Supervision guidelines. The regulation mandates specific calculation methodologies for exposures involving Qualified CCPs and non-Qualified CCPs, including default fund contributions and collateral, while also defining reporting and publication requirements. This framework applies to conventional commercial banks and foreign bank branches in Indonesia, with implementation commencing after the first Qualified CCP begins operations in the country.
Regulation / Regulation Search / Capital Calculation for Bank Exposures to Central Counterparty Institutions
Sector: Banking
Sub-Sector: Commercial Banks
Regulation Type: OJK Circular Letter
Regulation Number: 16/SEOJK.03/2023
Effective Date: 10/19/2023
Appendix 1 SEOJK 16-SEOJK.03-2023 Capital Calculation for Bank Exposures to Central Counterparty Institutions.pdf Abstract SEOJK 16-SEOJK.03-2023 Capital Calculation for Bank Exposures to Central Counterparty Institutions.pdf FAQ SEOJK 16-SEOJK.03-2023 Capital Calculation for Bank Exposures to Central Counterparty Institutions.pdf
Page Content Otoritas Jasa Keuangan (Financial Services Authority) Circular Letter Number 16/SEOJK.03/2023 regarding Capital Calculation for Bank Exposures to Central Counterparty Institutions.
ABSTRACT: The standard regarding Capital requirements for bank exposures to central counterparties issued by the Basel Committee on Banking Supervision (BCBS) in 2020 was a response to the 2007-2008 crisis, which demonstrated the weak resilience of banks and other market participants to shocks. In the context of over-the-counter (OTC) derivative transactions, this highlights the importance of mitigating systemic risk caused by OTC derivative transactions, leading the G20 to initiate reform programs, including requiring OTC derivative transactions to be cleared through central counterparties (CCP). Therefore, a standard is needed in Indonesia to serve as the basis for regulation and calculation of exposures to derivative transactions cleared through CCP institutions.
The legal umbrella for this OJK Circular Letter is mandated by Article 42A of OJK Regulation No. 27 of 2022 concerning the Second Amendment to OJK Regulation No. 11/POJK.03/2016 concerning Minimum Capital Requirements for Commercial Banks.
NOTE: This OJK Circular Letter takes effect from the date of establishment, namely October 19, 2023. This OJK Circular Letter applies to conventional commercial banks, including branches of banks located outside the country. This OJK Circular Letter regulates, among other things: a. General provisions regarding capital calculation for bank exposures to CCPs. b. Guidelines for calculating exposures related to transactions through CCPs, covering transactions with Qualified CCPs (for banks as CCP members and for banks as clients of CCP members) and transactions with non-Qualified CCPs, collateral for transactions with CCPs, default fund exposures (for banks transacting with both Qualified and non-Qualified CCPs), the upper limit of capital provision, and adjustments to calculations for Securities Financing Transactions (SFT) exposures. c. This OJK Circular Letter also regulates reporting to the OJK and publications regarding exposures related to transactions with CCPs. Exposure calculations for transactions conducted through CCPs in accordance with this OJK Circular Letter will begin to be carried out for the end-of-month positions following the month after the first Qualified CCP begins operations in Indonesia.