On September 1, MFA submitted a comment letter to the Board of Governors of the Federal Reserve System encouraging the Board to review and reconsider its supplementary leverage ratio and net stable funding ratio rules. With respect to the SLR, MFA encouraged the Board to modify its final rules to provide an offset to a bank’s capital requirements for initial margin posted by a customer to a central counter party or that is segregated from the bank’s assets under U.S. regulations with respect to cleared derivatives transactions. MFA also encouraged the Board to review and revise initial margin requirements for certain non-clearable swaps, such as total return swaps, to make the requirements risk-based. Finally, MFA encouraged the Board to reconsider the proposed net stable funding ratio rules to address concerns about liquidity and market impact. MFA encouraged the Board to revise the proposed rule in several areas, including: (1) providing symmetrical treatment with respect to valuation margin posted and received by a bank and repo and reverse repo transactions; (2) providing an adjustment to the amount of required funding for derivatives with shorter maturities; and (3) permitting banks to treat assets and liabilities in connection with client short positions as interdependent assets under the rule.
