ISDA/GFMA/IIF Global NSFR Briefing Note

ISDA, GFMA, and IIF welcome the decision by the Basel Committee on Banking Supervision (BCBS) in its review of the net stable funding ratio (NSFR) to give national jurisdictions the ability to lower the punitive 20% add-on for gross derivatives liabilities (GDL) to 5%. We believe the BCBS should adopt the 5% as a permanent measure, as this would reflect an appropriate compromise that would promote international consistency and avoid unintended consequences to derivatives businesses.

To the extent that the BCBS chooses to take no further action and jurisdictions move ahead with implementation of the NSFR, we believe they should do the same. Doing so would also free up resources within both the public and private sectors to focus on other critically important issues, ensure international consistency in the application of a framework and a level playing field for firms across jurisdictions, and avoid a potential increase systemic risk resulting from market fragmentation that would occur if different jurisdictions were subjected to different requirements.

Addressing Termination Troubles

When Enron announced a shock $618 million loss on October 16, 2001, it took a further 47 days until it filed for bankruptcy. For Bear Stearns, it took 266 days between its bailout of a structured credit fund run by...