In a notification, the Reserve Bank of India (RBI) said it delayed the implementation of Basel-III regulations for currency derivatives segment to January 2014.
The central bank postponed the implementation for the segment pending resolution of norms regarding trade settlement.
But the RBI said the new capital adequacy requirements will be implemented from April 1. In view of the shift in the start date of Basel III implementation, all instructions applicable as on January 1, 2013, except those relating to the credit valuation adjustment (CVA) risk capital charge for over-the-counter derivatives, would become effective from April 1, with banks disclosing Basel III capital ratios from the quarter ending June 30, 2013, the notification said.
The difference between the risk-free portfolio value and the true portfolio value that takes into account the possibility of a counter-party’s default is termed as CVA. In other words, CVA is the market value of the counter-party’s credit risk.
The CVA risk capital charges would be effective from January 2014 as the introduction of mandatory forex forward guaranteed settlement through a central counter-party has been deferred pending resolution.
RBI wants all lenders to settle currency forward through one clearing house, which some foreign lenders are opposed to owing to lack of clarity in rules.
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