14 Jan 2016

GFMA, IIF and ISDA Statement on the Fundamental Review of the Trading Book (FRTB) Framework issued today by the Basel Committee on Banking Supervision

Washington, 14 January 2016 – The Global Financial Markets Association (GFMA), the Institute of International Finance (IIF) and the International Swaps and Derivatives Association (ISDA) have issued the following statement on the Fundamental Review of the Trading Book (FRTB) framework issued today by the Basel Committee on Banking Supervision (BCBS):

“GFMA, IIF and ISDA share the Basel Committee’s goal of ensuring the safety and soundness of the global financial system, which is critical to enhancing investor and consumer confidence, and economic growth. We have remained supportive of BCBS’s work throughout the G20-mandated post-crisis programme and have continued to do so during the Fundamental Review of the Trading Book.

“In our preliminary review, we appreciate the technical revisions that have been made to the framework and also commend the BCBS for its commitment to review the rules over time, incorporating outputs from other important regulatory initiatives, such as treatment of sovereigns and simple, transparent and comparable securitizations.

“Overall, we are concerned that despite the BCBS’s reiteration not to significantly increase overall capital requirements, trading book capital will increase by 40% under the new rules based on the BCBS’s impact assessment. We worry that the rules may have a negative effect on banks’ capital markets activities and reduce market liquidity.

“Further impact assessment needs to be run to assess if the gap between the standard and internal models based capital outcomes is reasonable, considering the BCBS’s future work on standardized floors.

“We will be reviewing the rules in depth with our members and look forward to continued discussion with the BCBS to ensure the FRTB meets its original goals.”
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