Deutsche Bank's risk capital soars by Rs 1 billion in last qtr
Reserve Bank of India (RBI) and European regulators are yet to resolve a standoff regarding the treatment of the local platform for government bond trading, Deutsche Bank, one of the affected parties, has had to stump up more than ₹1 billion in capital for central counterparty exposures in the last quarter.
The massive increase in risk-weighted assets (RWA) for the German banking giant, which plays a major role in handling overseas investment flows into India, came after the European Securities and Markets Authority (ESMA) de-recognised the Clearing Corporation of India in October 2022.
According to regulatory reporting documents seen by ET, Deutsche Bank saw its RWA for risk exposure to an unnamed central counterparty clearing house increase to ₹3.76 billion as on September 30 from ₹997 million as on June 30. RWA essentially implies bank capital that must be set aside in accordance with risks.
De-recognition of the CCIL means that European banks doing business with the Indian clearing house must fork out more capital to account for greater risk, pushing up expenses.
The RWA for securitised assets in general decreased, but they were «partially offset by an increase of ₹1.1 billion for counterparty credit risk RWA, which was mainly driven by ₹2.8 billion higher RWA for risk exposures to a central counterparty (CCP), predominantly driven by a central counterparty for which the qualifying status… is no longer applicable,» read Deutsche Bank's report. It did not name the CCP.
In October last year, the ESMA de-recognised six Indian clearing houses including the Clearing Corporation of India, which houses the platform for trading in government bonds and interest rates swaps.
