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According to the Global Financial Markets Association and the Institute of International Finance’s (the “Associations”) letter, a revised NSFR that includes an overly conservative calibration could have severe consequences for the equity markets, which in turn could cause significantly adverse effects on the real economy. By unnecessarily increasing the funding cost for banking organisations’ equity market intermediation activities, the Revised NSFR would also potentially force such activities into the largely unregulated shadow banking system, increasing systemic risk. More globally, the Associations are concerned that an NSFR calibrated too conservatively for these activities would severely hinder the general capacity of banks to finance their clients and thus support growth.
The Associations therefore urge the BCBS to amend the Revised NSFR to more accurately calibrate the RSF (and, where applicable, the ASF) for equities, as discussed above,21 as well as to conduct a QIS researching the potential impacts of the Revised NSFR on global equity markets. If it is concluded that the revisions proposed in this letter cannot be adopted in the short time before the issuance of the final Revised NSFR, the Associations recommend that the equities portions of the final standard remain open to further revision based on the results of the QIS.