On 15 April 2014, the Basel Committee on Banking Standards (the "Basel Committee") published the final standard for measuring and controlling large exposures to constrain the maximum loss a bank could face in the event of a sudden failure of a counterparty or group of connected counterparties. The framework is scheduled to take effect from 1 January 2019 and will supersede the Basel Committee's 1991 standard on this topic. Standards or exposures to central counterparties are to be developed by 2016. The final standard includes the following revisions from the previous regime:
- a bank may not become exposed by more than 25% of its Tier 1 capital (or 15% in the case of global systemically important banks); and
- a "large exposure", attracting a reporting "hysteria" is triggered by an exposure of 10% of the bank's eligible capital base.
The final standards are available at: http://www.bis.org/publ/bcbs283.pdf.
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