What do you think about haircuts?

The Basel Committee on Banking Supervision has today issued for public consultation a proposal for incorporating the FSB’s policy framework for haircut floors for non-centrally cleared SFTs into the Basel III framework.

This proposal is based on the FSB’s report on Strengthening Oversight and Regulation of Shadow Banking – Regulatory framework for haircuts on non-centrally cleared securities financing transactions published in October 2014, which recommended that its policy framework for haircut floors for non-centrally cleared SFTs be incorporated into the Basel III framework by the end of 2015. The objective of this proposal is to create incentives for banks to set their collateral haircuts above the floors rather than hold more capital.

The Committee says it welcomes comments on this consultative document by Tuesday January 2016 via its website or by snail mail to: Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland. In accordance with standard practice, all comments will be published on the website of the Bank for International Settlements unless a respondent requests confidential treatment.