Sec lending industry to rethink its engagement with regulated entities, says ISLA鈥檚 Andrew Dyson
01 September 2023 UK
Image: EtiAmmos/stock.adobe.com
As the market looks to tackle the 鈥渆xtreme outcomes鈥� of Basel IV, the way the industry thinks about engaging with prudentially regulated entities is about to change, according to ISLA CEO Andrew Dyson.
The International 麻豆传媒 Lending Association (ISLA) has released its 麻豆传媒 Lending Market Report detailing the performance of the market as well as key focus points for participants.
In discussing the implementation of the Basel IV regime 鈥� which began its slow adoption on 1 January 2023 and is set to continue until 2025 鈥� Dyson says not enough credence within the Basel IV rules is given to short-dated liquidity-driven businesses, including securities finance transactions (SFTs).
Dyson says: "The most recent proposal from the Fed in North America suggests that the largest banks will need significantly more capital to support the higher levels of reported risk-weighted assets (RWAs) than the revised regime will require."
The ISLA report reveals that this raises several important issues as 鈥渘ew capital may not be that readily available鈥�.
Dyson indicates: 鈥淚nvestors may be less inclined to subscribe to new equity issuance, and growth from retained earnings can take years to reach the desired levels. In reality, we may see banks reducing or exiting businesses that are high consumers of RWAs.鈥�
The Association is following these developments closely and will work with market participants and wider stakeholders in efforts to ensure that markets remain open and are able to provide liquidity 鈥� something that is the 鈥渓ifeblood鈥� of the capital markets, says Dyson.
The International 麻豆传媒 Lending Association (ISLA) has released its 麻豆传媒 Lending Market Report detailing the performance of the market as well as key focus points for participants.
In discussing the implementation of the Basel IV regime 鈥� which began its slow adoption on 1 January 2023 and is set to continue until 2025 鈥� Dyson says not enough credence within the Basel IV rules is given to short-dated liquidity-driven businesses, including securities finance transactions (SFTs).
Dyson says: "The most recent proposal from the Fed in North America suggests that the largest banks will need significantly more capital to support the higher levels of reported risk-weighted assets (RWAs) than the revised regime will require."
The ISLA report reveals that this raises several important issues as 鈥渘ew capital may not be that readily available鈥�.
Dyson indicates: 鈥淚nvestors may be less inclined to subscribe to new equity issuance, and growth from retained earnings can take years to reach the desired levels. In reality, we may see banks reducing or exiting businesses that are high consumers of RWAs.鈥�
The Association is following these developments closely and will work with market participants and wider stakeholders in efforts to ensure that markets remain open and are able to provide liquidity 鈥� something that is the 鈥渓ifeblood鈥� of the capital markets, says Dyson.
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