ISLA: The misnomer that is Basel Endgame
21 June 2024 Switzerland
Image: SFT
In a breakout discussion at the International Securities Lending Association (ISLA) conference, discussion surrounding Basel Endgame seemed to draw on a notable theme — it is somewhat of a misnomer, as there really will be no actual end. This, one panellist noted, is a good thing.
The quips continued: “Endgame was a triumph of marketing over substance”, or as another panellist succinctly put it, “Endgame was badly named”.
While the play on words could be called somewhat apt, given the industry’s interest in when and how it will ‘end’, and exactly what this will result in, the panel were nevertheless serious in addressing the key questions.
Perhaps, by his own words “controversially”, one speaker highlighted an interesting assessment of current Basel regulations. They have, in fact, been successful. Banks, he suggests, have never been as well capitalised as they are now.
Though these regulations were initiated in many ways on the back of the 2008 credit crunch and global financial crisis, one can see the financial sector’s resilience in recent times — not least during Covid — as a testament to their effectiveness.
They are not without problems, of course. The speakers touched on another key area that has been highlighted during a number of the day’s panels — inconsistency between regulators across regions, and exactly how the myriad related rules and requirements all match up, particularly given the cross-border nature of securities lending.
Similarly, estimates of the increased capital requirements vary dramatically, but according to one of the participants, “it is unlikely to be capital neutral for anybody. Banks have been put on notice”. He did suggest, however, that exactly how much this will be and the true impact it will have, will only be seen when the time actually comes.
Moving onto the US elections — somewhat inevitably — one member believes a Trump White House will be key. He noted that during President Trump’s previous term, one of the first things he did was push Basel discussion “into the long grass”. If he follows suit in a second term, any ‘endgame’ will likely move further out in time.
A general consensus emerged from those discussing the issue: for the US it may be a case of get this done now or never.
A more positive counter-argument was put forward however. If a generally right wing, soft touch on financial services, republican were to be elected, it is possible he would aim to align the US with Europe to the benefit of everybody.
Though Basel and securities lending rarely feature as a hot-button topic on the national political stage, it seems in the US this is exactly what is happening. Basel is becoming politically weaponised in many states, and nationally, to the extent that there was a political advertisement on the subject during the Superbowl. Hard to believe, but as the speaker affirmed: “I kid you not.”
The quips continued: “Endgame was a triumph of marketing over substance”, or as another panellist succinctly put it, “Endgame was badly named”.
While the play on words could be called somewhat apt, given the industry’s interest in when and how it will ‘end’, and exactly what this will result in, the panel were nevertheless serious in addressing the key questions.
Perhaps, by his own words “controversially”, one speaker highlighted an interesting assessment of current Basel regulations. They have, in fact, been successful. Banks, he suggests, have never been as well capitalised as they are now.
Though these regulations were initiated in many ways on the back of the 2008 credit crunch and global financial crisis, one can see the financial sector’s resilience in recent times — not least during Covid — as a testament to their effectiveness.
They are not without problems, of course. The speakers touched on another key area that has been highlighted during a number of the day’s panels — inconsistency between regulators across regions, and exactly how the myriad related rules and requirements all match up, particularly given the cross-border nature of securities lending.
Similarly, estimates of the increased capital requirements vary dramatically, but according to one of the participants, “it is unlikely to be capital neutral for anybody. Banks have been put on notice”. He did suggest, however, that exactly how much this will be and the true impact it will have, will only be seen when the time actually comes.
Moving onto the US elections — somewhat inevitably — one member believes a Trump White House will be key. He noted that during President Trump’s previous term, one of the first things he did was push Basel discussion “into the long grass”. If he follows suit in a second term, any ‘endgame’ will likely move further out in time.
A general consensus emerged from those discussing the issue: for the US it may be a case of get this done now or never.
A more positive counter-argument was put forward however. If a generally right wing, soft touch on financial services, republican were to be elected, it is possible he would aim to align the US with Europe to the benefit of everybody.
Though Basel and securities lending rarely feature as a hot-button topic on the national political stage, it seems in the US this is exactly what is happening. Basel is becoming politically weaponised in many states, and nationally, to the extent that there was a political advertisement on the subject during the Superbowl. Hard to believe, but as the speaker affirmed: “I kid you not.”
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