SIFMA AMG Submits Letter to BCBS on Net Stable Funding Ratio and Treatment of Equities, Repos and Corporate Debt (with Lofchie Comment)

The Asset Management Group of SIFMA ("SIFMA AMG") submitted a letter to the Basel Committee on Banking Supervision ("BCBS") expressing concerns with the potential market impact of the Net Stable Funding Ratio ("NSFR") outlined in the BCBS January 2014 Consultative Document.

SIFMA AMG requested that the BCBS consider the impact that the proposal will have on all potential participants in the markets for equities, repurchase agreements and corporate debt, including funds and clients managed by SIFMA AMG members. SIFMA AMG recommended that the BCBS conduct a Quantitative Impact Study to adopt a revised framework in accordance with an approach set forth in a Global Financial Markets Association comment letter dated August 29, 2014.

Lofchie Comment: As global banking regulators have asserted more control over both securities and insurance markets in the name of systemic stability, there has been substantial and steady feedback from both the regulated and the regulators in those other industries. Participants – both the regulated and the regulators – have questioned whether the requirements that the bank regulators would impose are in fact based on empirical research or reflect the bank regulators' lack of familiarity with those other industries. There have certainly been instances, such as when the U.S. Financial Stability Oversight Council threatened to declare advisory firms to be systemically significant, in which the actions of the bank regulators seemed to be either overreaching or reflective of some misunderstanding of the operations of firms outside the banking industry.

See: SIFMA AMG Letter. See also: BCBS Consultative Document.