Collateral Risk for Fair Valuation and CCR Capital

The exchange of regulatory initial margin for uncleared derivatives (BCBS 261 due on the 1st of September 2016) implies a massive consumption of collateral. This paper proposes a new model to account for collateral and its quality for both fair valuation and CCR capital frameworks defined under IFRS 13 and CRD IV. The industry is expected to enhance and implement more accurate methods for reflecting the "exact" value of collateral, preserving competitiveness and optimising capital consumption