The Reserve Bank of India has amended its capital adequacy directions for All India Financial Institutions to align the treatment of clearing exposures with international standards. The amendment, which took effect on issuance, applies a 2% risk weight when an AIFI acts as a clearing member of a qualifying central counterparty for its own over-the-counter derivatives, exchange-traded derivatives and securities financing transactions. The same risk weight applies to an AIFI’s trade exposure when it provides client clearing services and must reimburse the client for losses if the qualifying central counterparty defaults. The change follows the RBI’s review of the provision requiring clearing member financial institutions to obtain a legal opinion.
Reserve Bank of India applies 2% risk weight to specified AIFI trade exposures to qualifying central counterparties
The Reserve Bank of India has revised its capital rules for All India Financial Institutions to apply a 2% risk weight to specified trade exposures to qualifying central counterparties. The treatment covers proprietary clearing and client clearing where the AIFI must reimburse client losses following a counterparty default, and took effect on issuance.