SIFI Loss Absorbency Proposals

The Global Financial Markets Association (GFMA) provides a discussion note to the Financial Stability Board (FSB) on significantly important financial institution (SIFI) loss absorbency proposals submitted to the FSB Standing Committee on Supervisory and Regulatory Cooperation.  GMFA focuses on the proposals under consideration by the FSB and the Basel Committee on Banking Supervision (BCBS) relating to the establishment of additional loss absorbing capacity for SIFIs.  The paper takes the position that GFMA and its members do not think a SIFI capital buffer should be adopted. Any additional capital requirements in excess of those already imposed by Basel III should be carefully considered against the potential negative economic consequences of lower credit availability and a higher cost of capital for the financial system as a whole. Numerous significant steps have been taken, in addition to the Basel III capital rules, to reduce the systemic risk of SIFIs, including enhanced supervision, recovery and resolution plan requirements, and strengthened regulatory authority to implement orderly resolutions of SIFI failures.