ISDA and the Global Financial Markets Association (GFMA) have responded to the Basel Committee's proposals that the present value of premia paid for credit protection should be assigned a 1,250% risk weight. The proposals seeks to address capital arbitrage achieved through credit risk mitigation or synthetic securitisation transactions that do not produce a significant transfer of risk. ISDA and GFMA support this objective but find that the concern could be addressed by Pillar 2 guidance and supervision, together with forthcoming changes to accounting of loan loss reserves. (Source: Response to Consultation on Recognising Cost of Credit Protection Purchased)