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8.3.
Regardless of whether a central counterparty (CCP) is classified as a qualifying CCP (QCCP), a bank retains the responsibility to ensure that it maintains adequate capital for its exposures. Under Pillar 2, a bank should consider whether it might need to hold capital in excess of the minimum capital requirements if, for example:
(1)
its dealings with a CCP give rise to more risky exposures;
(2)
where, given the context of that bank’s dealings, it is unclear that the CCP meets the definition of a QCCP; or
(3)
an external assessment such as an International Monetary Fund Financial Sector Assessment Program (FSAP) has found material shortcomings in the CCP or the regulation of CCPs, and the CCP and/or the CCP regulator have not since publicly addressed the issues identified.
8.4.
Where the bank is acting as a clearing member, the bank should assess through appropriate scenario analysis and stress testing whether the level of capital held against exposures to a CCP adequately addresses the inherent risks of those transactions. This assessment will include potential future or contingent exposures resulting from future drawings on default fund commitments, and/or from secondary commitments to take over or replace offsetting transactions from clients of another clearing member in case of this clearing member defaulting or becoming insolvent.
8.5.
A bank must monitor and report to senior management, the appropriate committee of the Board, or the delegated authority of the board on a regular basis all of its exposures to CCPs, including exposures arising from trading through a CCP and exposures arising from CCP membership obligations such as default fund contributions.
8.6.
Where a bank is clearing derivative, SFT and/or long settlement transactions through a QCCP as defined in Chapter 3 of this framework, then paragraphs 8.7 to 8.40 will apply. In the case of non-qualifying CCPs, paragraphs 8.41 and 8.42 will apply. Within three months of a CCP ceasing to qualify as a QCCP, unless SAMA requires otherwise, the trades with a former QCCP may continue to be capitalized as though they are with a QCCP. After that time, the bank’s exposures with such a CCP must be capitalized according to paragraphs 8.41 and 8.42.
