TBMA, ISDA and LIBA Submit Comments to the FSA on Large Exposures Regulation of Securities Regulation Lending and Repo Transactions under Basel II

The Bond Market Association (TBMA)*, the International Swaps and Derivatives Association (ISDA), and the London Investment Banking Association (LIBA)provide comments to the Financial Services Authority (FSA) on large exposure regulation of securities lending and repo transactions under Basel II. Proposals under Basel II impose a “haircut” on the value of collateral in respect of securities lending and repo transactions. The groups point out that assuming haircutting the value of collateral is appropriate in the sphere of credit risk, the resulting concentration risk charges produce a serious anomaly within the existing large exposures risk methodology, resulting in prohibitive large exposure charges, particularly in connection with intra-group securities lending and repo transactions.
*SIFMA is the product of a merger between the Securities Industry Association (SIA) and The Bond Market Association (TBMA) in 2006.