via Global Trade Review by Jacob Atkins
US banking regulators have proposed maintaining the current capital treatment of key trade finance products as part of the country’s adoption of the latest tranche of Basel reforms.
If the proposals unveiled on March 19 are implemented, trade-related contingent instruments with a maturity of one year or less will retain a 20% credit conversion factor (CCF), which denotes how much capital must be held against a given exposure.
Transaction-related contingent items with a maturity of more than one year, such as performance standby letters of credit, performance bonds and bid bonds, will retain a CCF of 50%.