{"text":[[{"start":10.05,"text":"Wall Street groups are warning US regulators that their plans to implement “Basel Endgame” global bank capital requirements will threaten liquidity in Treasury markets, urging them to rework proposals to manage market risk."}],[{"start":22.950000000000003,"text":"The claim of potential instability in the $29tn Treasury market is the latest burst of lobbying by US banks over Washington’s plans to adopt rules drawn by global regulators on how lenders assess risk in response to the 2008 financial crisis."}],[{"start":39.5,"text":"The US Federal Reserve and other regulators have already dramatically watered down their plans under pressure from lenders, meaning that instead of causing a big increase in overall capital requirements for American banks, they are now expected to lower them. "}],[{"start":53.4,"text":"This represents the largest lobby victory for banks since the 2008 crisis. Goldman chief executive David Solomon said earlier this year he was “encouraged” by the Fed’s new stance on the Basel reforms. "}],[{"start":67.05,"text":"However, Wall Street groups are pushing them to go further and warning that without further reforms, specifically to the proposals on the market risk part of the Basel rules, these could harm US debt markets by reducing liquidity in Treasury trading."}],[{"start":81.64999999999999,"text":"Three of the world’s top financial trade bodies have written a letter to the US Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, urging them to change their proposals."}],[{"start":93.35,"text":"The letter, seen by the FT, said the latest proposals would lead to an increase of between 30 and 89 per cent in bank capital requirements for their trading activities in this area, based on estimates from eight of the biggest US lenders. "}],[{"start":107.39999999999999,"text":"“Several aspects of the proposal would produce outcomes that are not sufficiently aligned with economic risk,” said the letter from the International Swaps and Derivatives Association, the Securities Industry and Financial Markets Association and the Institute of International Finance."}],[{"start":123.39999999999999,"text":"One of their biggest concerns is that banks’ capital requirements for counterparty credit risk could be increased after US trading in Treasury bonds and repo securities is forced to shift to central clearing from next year."}],[{"start":135.35,"text":"This shift to central clearing will allow traders to lower the amount of collateral, or margin, they need to back their Treasury trades. But banks argue the Basel proposals will push up their capital requirements for counterparty credit risk in response to the lower collateral."}],[{"start":149.25,"text":"Scott O’Malia, chief executive of Isda, said: “If this issue is not addressed, liquidity providers in the US Treasury market will see their capital charges rise as the market moves towards mandatory Treasury clearing at the end of this year. "}],[{"start":163.4,"text":"“We can’t let Treasury market liquidity deteriorate,” he said, urging regulators to ensure the capital treatment of Treasury repos “appropriately reflects economic risk”. "}],[{"start":173.6,"text":"Risk to liquidity in the Treasury market has been a frequent argument by banks in lobbying for looser rules, tapping into the need for the US to issue vast amounts of debt at a rapid clip in the coming years. "}],[{"start":186.45,"text":"However, earlier bank regulation reforms have not meaningfully shifted banks’ holdings of Treasuries in absolute terms. Holdings have increased but are still only about 2 per cent of the total Treasury market, far below what they were before 2008. "}],[{"start":202.95,"text":"The trade bodies are calling for several changes to the market risk proposals, known as the fundamental review of the trading book. These include changes to the capital treatment of repo-style transactions and to the default risk capital requirements which they said “materially overstate” the risk from extreme market shocks."}],[{"start":221.29999999999998,"text":"In March, the Fed published its latest Basel proposals, saying that combined with other recent reforms to banking regulations they would lower capital requirements for the biggest US lenders by 4.8 per cent."}],[{"start":233.39999999999998,"text":"The Fed declined to comment on the letter. Officials are said to be sceptical of the assertions, believing the new requirements would mostly impact less-liquid assets and have little effect on Treasuries, according to people familiar with their thinking."}],[{"start":246.79999999999998,"text":"Any changes to US implementation of the Basel rules will be closely watched by banks and regulators in other countries. The Bank of England and the EU have already delayed the market risk part of their Basel reforms as they wait to see how Washington adopts them."}],[{"start":269.44999999999993,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1781763614_4044.mp3"}