Basel IV outlines how the new SA-CCR will replace previous approaches, including the current exposure method (CEM) and the standardized method (SM), and will be mandatory for over-the counter derivatives, exchange-traded derivatives, and long settlement transactions. Financial institutions around the world will be required to use the new methodology to calculate their CCR exposures.
Calculations under Basel IV are more complex, requiring more data attributes. The calculations are also more interdependent with other parts of the capital framework, including those for FRTB, Leverage Ratio (LR) and Large Exposure (LE).
Adoption of the new SA-CCR approach is taking different paths globally. Some jurisdictions may have already implemented it, some others may not have started yet, while others may adopt the Simplified Approach (SA) or Original Exposure Method (OEM).