What is SCCL? A Beginner’s Guide

What is SCCL? A Beginner’s Guide

1. Overview

The Single-Counterparty Credit Limits (SCCL) rule is a key regulation issued by the Federal Reserve. It is designed to make sure that large banks do not take on too much credit risk with any single borrower or trading partner. In simple terms, SCCL limits how much a bank can lend or be exposed to any one counterparty.

The goal is to reduce the chance that the failure of a large counterparty, like a major financial institution, could threaten the health of a bank or even the broader financial system. SCCL is part of the broader set of rules under the Dodd-Frank Act aimed at making the financial system safer.

You can think of SCCL as a diversification rule for credit exposure. Just like investors are encouraged not to put all their money in one stock, SCCL requires banks to spread their credit risk across different counterparties.

2. Regulatory Requirement

The SCCL rule is implemented across three separate regulatory subparts—each tailored to a specific type of financial institution:

While these subparts share a common goal, limiting credit exposure to any one counterparty, they differ in terms of which institutions they govern. For a breakdown of these distinctions and how the Federal Reserve tailors SCCL requirements by entity type, read our detailed blog post:
Understanding the Three SCCL Subparts: How Regulations YY and LL Divide Responsibility by Institution Type.

Covered institutions must calculate their total credit exposure to each counterparty and report their top 50 exposures every quarter using the FR 2590 report. For a full overview of this requirement, see our blog post: What is FR 2590? Regulatory Scope and Purpose.

3. Common Challenges

While the concept of SCCL is straightforward, putting it into practice can be complex. Here are some of the common challenges institutions face:

  • Counterparty Identification: SCCL requires firms to group counterparties not just by legal structure but also by control and economic interdependence. This means firms must look beyond legal names and understand how entities are linked.
  • Exposure Measurement: The rule covers many types of credit transactions, including loans, securities, derivatives, repo-style financings, and guarantees. Each type has its own calculation method. For example, derivative exposures often require advanced modeling techniques.
  • Risk Shifting: When collateral, guarantees, or credit protection is involved, credit exposure may shift from one entity to another. Firms must track and report these shifts correctly on Schedule G-5 of FR 2590.
  • Daily Monitoring: Even though the FR 2590 report is filed quarterly, banks must monitor SCCL compliance on a daily basis. This requires strong systems that can aggregate exposures in near real-time.
  • Reconciling Reports: SCCL reporting needs to align with other regulatory reports like FR Y-9C and the Call Report. Ensuring consistency across these reports can be a challenge.

4. Peer Approaches

To address these challenges, many banks and FBOs have taken the following steps:

  • Built centralized data platforms that serve as a single source of truth for regulatory reporting
  • Automated calculations for derivative exposures and collateral recognition
  • Used legal entity identifiers (LEIs) to manage and maintain counterparty hierarchies accurately
  • Created specific controls and quality checks within the SCCL reporting process
  • Worked with external advisors to help interpret rules and design effective compliance frameworks

5. GLOBAL ABAS View

At GLOBAL ABAS, we see SCCL as more than just a compliance requirement. We believe it is also an opportunity for firms to improve their risk management and data governance practices.

Our team helps clients:

  • Understand and apply SCCL rules clearly, including complex definitions like "credit transaction" and "major counterparty"
  • Design scalable systems that support FR 2590 and other regulatory reports
  • Build automated controls for exposure measurement and counterparty grouping
  • Train teams to implement and use Schedules G-1 through G-5, M-1, M-2, A-1, and A-2 effectively
  • Address real-world issues like index derivatives, SPVs, and economic interdependence assessments

Our approach is practical, flexible, and tailored to each client’s needs and systems.

6. Final Thoughts

SCCL plays a key role in helping banks manage credit concentration risk. By limiting how much exposure a bank can have to any one counterparty, the rule promotes diversification and helps protect the financial system from cascading failures.

Although implementing SCCL can be complex, banks that invest in strong systems, clean data, and clear interpretations of the rule will be better positioned—not only to meet regulatory demands but also to strengthen their internal risk and data frameworks.

To learn more about how GLOBAL ABAS can support your SCCL compliance program, visit our website or subscribe for future updates.

Disclaimer: This blog post is for informational purposes only and reflects our understanding of the SCCL rule and FR 2590 reporting as of the date of publication. It does not constitute legal, regulatory, or professional advice. Institutions should consult with internal and external advisors and refer directly to the SCCL rule (12 CFR Part 252, Subpart H) and FR 2590 instructions for specific guidance. GLOBAL ABAS disclaims any liability for actions taken or not taken based on this information.

Consult a GLOBAL ABAS Consulting, LLC professional regarding your specific issues and questions. Your feedback will help us improve the SCCL Compliance Lab. Please let us know what you think in the Comment below. Copyright © 2025 GLOBAL ABAS Consulting, LLC. All rights reserved.

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