Risk Magazine is reporting that ISDA is to embark on a re-write of the Standard Credit Support Annex (SCSA), dubbed “SCSA II”.
The triple-whammy delivered by the Basel Leverage Ratio (see this blog post for more detail), the BCBS/IOSCO rules on margin requirements for non-centrally cleared derivatives (see this blog post for more detail) and the Basel II credit risk framework have proved fatal. Accordingly, an ISDA working group has been charged with amending the Implied Swap Adjustment methodology within the SCCA – which employs the concept of settlement in one of seven ‘Transport Currencies’ – to something that it both regulatory compliant and less capital intensive. The preferred solution appears to involve settlement in one of 17 underlying currencies which, whilst more capital efficient, largely re-introduces the cross-currency settlement risk that ISDA was so keen to eliminate first time round.
 This requires a bank to levy an 8% haircut on collateral which is in a different currency to the associated exposure.