Basel trading book plans conflict with CMU

Author: Tom Young | Published: 11 Nov 2015

The Basel Committee’s plans to force banks to hold more capital for assets in their trading books has been met with strong opposition by the industry.

The committee’s proposed rules, the Fundamental Review of the Trading Book (FRTB), is the latest attempt to toughen treatment given to securitised debt.

The rules, which are due to be finalised by December this year, and in place by January 2019, could make secondary trading in securitised products unprofitable for broker-dealers. That conflicts directly with the European Commission’s plans to grow the securitisation market.

"The EC has a seat at Basel so they must be aware of the potential impact on securitisation," said Michael Lever, head of prudential at the Association for Financial Markets in Europe (Afme).

"I can’t speak for them, but when they consider implementing this in Europe they have to consider their overall institutional objectives such as the...