Rules on concentration risk relaxed

BASEL – The Basel Committee on Banking Supervision (BCBS) has issued final standards on measuring and controlling large exposures. This is specifically aimed at large broker-dealers that could suffer heavy losses from the default of one trading counterparty to which they are exposed across many transactions – as was the case with Lehman Brothers in 2008. To reduce this risk, BCBS has capped the exposure to a single counterparty as a percentage of the bank’s capital.