US Derivatives Capital Reforms: 96% CVA Charge Increase Draws Mixed Industry Response

Proposed US capital measures would increase derivatives counterparty risk charges by approximately 96%. While this significant rise has raised concerns among some market participants, others contend the impact may be manageable.

Industry sources suggest banks could mitigate the higher capital requirements by adjusting their hedging strategies to better align with the new regulatory framework for measuring exposures. However, there are calls for enhanced alignment beyond current proposals.

“It’s possible to reasonably align the capital relief with hedging the market risk,” one source noted.

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