Global Correspondence

GFMA and ISDA Submit Comments to the BCBS on Recognising Cost of Credit Protection Purchased

GFMA and the International Swaps and Derivatives Conference, Inc. (ISDA) provides comments to the Basel Committee for Banking Supervision (BCBS) in response to the BCBS Consultation Document, Recognising cost of credit protection purchased (published 22 March 2013).  The groups are concerned 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. In addition the groups voice concerns about synthetic securitisation transactions, non-securitisation transactions, the potential impact of changes to the accounting standards affecting loan loss reserves, and additional questions posed in the BCBS Consultation Document.

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