Regulatory capital is the amount of capital a financial institution must hold against its assets as specified by its regulator, limiting the amount of credit which the institution can make available as part of its business activities.
Whilst such capital requirements, underpinned by Basel Accords, are important to safeguard the global financial system, they also place significant financial burdens on banks to implement adequate procedures and infrastructure to comply with the range of capital, liquidity, leverage, and counterparty requirements.Failure to comply with these requirements can result in significant fines and penalties for these institutions
For firms to mitigate against these legal and operational risks, firms can use credit risk mitigation measures, such a close-out netting. However, to take advantage of such credit risk mitigation requires accurate and granular legal agreement data, including the legal opinion data.
Many of D2LT’s investment banking clients have benefitted from our guidance around regulatory capital and capital optimisation to help them reduce their regulatory capital, reduce reportable exposure under master agreements, as well as efficient help them use supporting legal opinions in respect of netting and collateral enforceability.