Banks say funding rules will make key equities trades more expensive
Banks are sounding the alarm about a proposed global rule aimed at forcing them to fund themselves more safely, warning that it could have “severe” knock-on effects on short selling and other important equities market transactions.
Industry lobbyists have warned the Basel Committee on Banking Supervision that proposed funding rules could make it five times more expensive for banks to facilitate short selling, in which investors bet that share prices will fall.
The rule would also make it much more expensive for banks to provide equity swaps, according to the letter from the Global Financial Markets Association and the Institute of International Finance, two global lobbying groups.
The letter, sent to the Switzerland-based Basel Committee on Friday and seen by the Financial Times, says banks have “serious concerns” about the treatment of equities under the NSFR regime, saying the regime could “significantly increase transaction costs across equity markets for all participants”.
The banks also warn that the rules would impair the functioning of the equity swaps market, and boost costs associated with investment in equity indexes.
The complaints come amid broader industry concern about regulation imposing a chilling effect on financial activity – as well as on their own profits.
Source: ft
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