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OCC Comments on Unintended Consequences of The Leverage Ratio

OCC joined other derivatives exchanges and clearing member firms in sending a letter to the Bank of International Settlements and the European Commission regarding a number of unintended consequences of the leverage ratio using the current exposure method (CEM). The letter says that without changes to the current CEM in the leverage calculation for exchange-traded derivative exposures, the application of the leverage ratio will result in vastly increased capital requirements for general clearing members as well as their underlying clients, which will fundamentally threaten these business models to the detriment of the liquidity and stability of European and global markets.

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