Today, MFA and the Asset Management Group of SIFMA (AMG) filed a joint comment letter to express buy-side opposition to a recent Federal Reserve (Fed) proposal (Proposal) to change the reporting instructions for the Banking Organization Systemic Risk Report FR Y-15. The change would expressly include all cleared derivatives in the risk-based capital Surcharge scores for global systemically important banks, or G-SIBs. This means that G-SIB Surcharge capital requirements would increase by billions of dollars in the aggregate, putting more pressure on banks to offer affordable and accessible client clearing services.
MFA and AMG believe the Fed should withdraw the Proposal, because: (1) the Proposal would overstate the risk arising from an FCM’s clearing of client positions, as FCMs incur limited risk when guaranteeing clients’ performance to a CCP in a cleared derivative transaction; and (2) the Proposal would impose disproportionate capital requirements on G-SIBs’ clearing activities and disincentivize G-SIBs from providing clearing services to their clients. MFA and AMG request that the Fed should at least reissue the Proposal for informed public comment, with supporting economic analysis of its expected impacts and other issues, such as its cumulative effect when considered alongside the Supplementary Leverage Ratio and any other bank capital or liquidity rules.
