Basel Committee to Reopen Debate on NSFR Derivatives

Risk.net reports that the Basel Committee on Banking Supervision is slated to reopen debate on how derivatives exposure should be treated under the Net Stable Funding Ratio (NSFR).

Since the release of the NSFR, market participants have railed against a provision that requires banks to maintain stable funding equivalent in value to 20 percent of their gross derivative liabilities.

It is not clear yet how broad the review will be, nor how it will impact the ratio's implementation – scheduled for January 1, 2018, in some jurisdictions. Europe is already set to miss the January 2018 deadline, given the revised Capital Requirements Regulation (CRR II) can only be implemented after it has been agreed during a lengthy rulemaking process and ratified by the European Parliament.

The U.S. Treasury, meanwhile, recommended delaying implementation of NSFR for domestic banks in its June report on U.S. financial regulations. However, other regulators – such as the Hong Kong Monetary Authority – are poised to implement on schedule, leading to fears that an unleveled playing field could develop.

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