IACPM Submits Comment Letter to Basel Committee

The Basel Committee published the consultative document, “Recognizing the Cost of Credit Protection Purchased” (BCBS245).

The IACPM feels that the requirements proposed in the document would undermine any regulatory recognition of the risk mitigation benefits of prudent hedging. By so doing, it would undermine the economic incentives to legitimately transfer credit risk to outside investors.

Through the efforts of the IACPM Regulatory Committee Working Group we were able to shape a consensus view to provide the Basel Committee insight into our members’ use of credit protection as a risk management tool with the goal to protect the use of credit default swaps and synthetic securitizations as risk management tools for credit portfolio managers.

In the comment letter the IACPM recommends to either withdraw the proposed document completely or restructure it substantially.

IACPM comment letter

Complete listing of comments received by the BIS

Recognizing the Cost of Credit Protection Purchase

 

Status: Outstanding. Discussions are ongoing with the Basel Committee. A recent telephone conference call with representatives of the Basel Working Group suggested that the final rules, or possibly a second consultative document (less likely), would be released by year-end 2013.