Federal Reserve Re-Proposes Single-Counterparty Credit Limits

10 March 2016
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Key takeaways

  • On March 4, 2016, the Federal Reserve published its re-proposal of the single-counterparty credit limits requirement mandated by Section 165(e) of the Dodd-Frank Act.
  • The requirement limits the “net credit exposures” a covered company may have to a single counterparty to a specified percentage of the company’s regulatory capital. The percentage limit and regulatory capital denominator (i.e., the “eligible capital base”) varies based on the “systemic footprint” of the covered company, measured by asset size and other factors.
  • The re-proposal is similar in many respects to the Basel Committee on Banking Supervision’s framework for measuring and controlling large exposures. The re-proposal, however, also departs from the Basel Committee framework, in some cases by imposing a more stringent requirement on covered companies.