BBA, ISDA and the Association for Financial Markets in Europe (AFME) have responded to FSA’s latest consultation on strengthening capital standards. The response sets out detailed comments, and its overarching observations are:

  • it is not ideal for FSA to be consulting on implementing a version of CRD3 that is not yet agreed, nor before the results of the extensive QIS exercise currently under way have been analysed;
  • the timetable for CRD 3 implementation is not realistic and FSA should fight for a more appropriate timetable;
  • FSA has developed its proposals in each area separately without considering the linkage between policy developments including proposals in CRD 4;
  • industry supports the copy-out approach FSA has taken, but thinks it has also drafted super-equivalent requirements in some areas where it should not, and not made use of national discretions where it should. Also, “straight” copy-out is confusing in some areas and FSA should consider how to make it more comprehensible;
  • FSA is increasing use of waivers, which are lengthy and burdensome to get. The industry wonders whether there is an alternative to the full waiver process for some applications; and
  • FSA must be aware of other international initiatives, and consider how best to minimise the effects on firms of several regulatory changes over a short time, and also should not move ahead of the pack to the disadvantage of UK firms.

Commenting specifically on the items raised in CP09/20, the industry is worried the changes to the large exposures requirements will be onerous and difficult to understand and does not support some of the limits FSA wants to impose. In respect of securitisation, the response urges reconsideration of timing, grandfathering and transitional provisions. Finally, industry is worried about current proposals on the trading book, in particular the correlation trading carve-out.