OCC Comment Letter Regarding Notice of Proposed Rulemaking for the Standardized Approach for Calculating the Exposure Amount of Derivative Contracts

In a February 15 letter to the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation, OCC commented on the notice of proposed rulemaking regarding the standardized approach for calculating the exposure amount of derivative contracts. While OCC expressed deep appreciation for the proposal addressing its primary concerns, OCC also commented that initial margin should be recognized in the calculation of the leverage ratio. OCC further noted three technical issues that bear further consideration by the banking agencies under the proposal: 1) clearing members should be permitted to net a clearing agent's listed options positions and cleared futures positions for purposes of calculating potential future exposure (PFE), 2) clearing member exposures related to cleared transactions should be calculated based on a minimum risk horizon of five days rather than 10 days, and, 3) the proposal appears to inappropriately restrict offsets for exposures with different reference entities within an equity hedging set; banking organizations should be permitted to decompose exposures for SA-CCR calculation purposes.

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