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Financial Services Law Insights and Observations

Federal agencies permit early adoption of standardized approach for counterparty credit risk

Federal Issues Covid-19 OCC FDIC Federal Reserve System

Federal Issues

On March 26, the OCC, Federal Reserve System, and FDIC issued a notice permitting depository institutions and depository institution holding companies to implement the final rule titled Standardized Approach for Calculating the Exposure Amount of Derivative Contracts (SA-CCR rule) for the first quarter of 2020, on a best efforts basis. A banking organization that elects to adopt the SA-CCR methodology must adopt the methodology for all derivative contracts; a banking organization cannot implement the SA-CCR methodology for a subset of its derivative contracts. A banking organization may adopt some of the technical amendments described in the rule regardless of whether the banking organization chooses to early adopt the SA-CCR methodology. The SA-CCR rule effective date remains April 1, 2020, and the mandatory compliance date remains January 1, 2022.