In opening remarks at the ISDA Treasury Forum, ISDA Chief Executive Officer Scott O’Malia argued that upcoming US Treasury market clearing mandates will be difficult to implement at scale unless the US prudential framework is adjusted to preserve banks’ capacity to intermediate and provide client clearing. The remarks point to three capital framework issues. First, the supplementary leverage ratio (SLR) is described as a non-risk-sensitive constraint that can limit balance sheet capacity, with ISDA proposing a permanent exclusion of US Treasuries from the SLR calculation and urging US banking agencies to consult on reform. Second, ISDA and the Securities Industry and Financial Markets Association estimate the proposed Basel III endgame rules and the US global systemically important bank (G-SIB) capital surcharge would raise capital for G-SIB client clearing businesses by more than 80%, which ISDA characterises as inconsistent with the policy objective of expanding client clearing. Third, ISDA calls for margin and corresponding bank capital requirements to reflect actual risk by enabling client access to cross-margining across US Treasury securities and futures and by recognising netting benefits across US Treasury repos and futures, warning that otherwise banks may face higher capital requirements or require clients to post full margin. On market readiness, the remarks note that the Securities and Exchange Commission finalised Treasury market reforms in December 2023, with the first cash clearing mandates due at the end of 2026 and repo mandates six months later. Preparatory work cited includes Fixed Income Clearing Corporation rule book proposals, CME proposals for a new clearing service, and ICE’s plans to launch a Treasury clearing service, alongside SIFMA-led work on client documentation and ISDA’s published comparison of clearing models.
ISDA 2025-06-24
ISDA urges US banking agencies to reform leverage and capital rules to support mandatory US Treasury and repo clearing
ISDA CEO Scott O’Malia noted challenges in implementing US Treasury market clearing mandates, emphasizing adjustments in the US prudential framework to maintain banks' intermediation capacity. Key issues include the supplementary leverage ratio's impact on balance sheet capacity, potential capital increases under Basel III endgame rules, and the need for margin requirements to reflect actual risk, with market readiness efforts underway for mandates starting in late 2026.