ABA to Agencies: No Minimum Haircuts for SFTs in Basel IV

As the federal banking agencies weigh the implementation of Basel IV standards in the United States, the American Bankers Association on Friday urged them not to implement haircut floors for securities financing transactions.

“[C]ertain aspects of the framework are overly broad and go beyond the stated objective ‘to limit the build-up of excessive leverage outside the banking system, and to help reduce procyclicality of that leverage,’” ABA said. “Moreover, we believe that the capital impact of the minimum haircut floors for SFTs is greater than necessary to achieve the stated policy objectives.”

ABA added that any new standard on minimum haircuts should be subject to a quantitative impact study before being brought to the U.S. For more information, contact ABA’s Hugh Carney.