GFMA and ISDA provide comments to the Basel Committee for Bank Supervision (BCBS) responding to the BCBS Consultative Document, Recognising Cost of Credit Protection Purchased.
The groups share multiple concerns, including that, while capturing a small number of transactions deemed abusive by the regulators, the proposed rule would have a disproportionate effect on a wide range of banks’ financing activities (both in corporate and investment banking), wherever banks seek to hedge borrower credit risk or associated counterparty risk. Also they believe the Committee’s concern can and should be addressed by regulatory supervision, and may also be partly addressed by proposed changes to relevant accounting standards, without amendments to existing Pillar 1 capital rules.
