The Financial Stability Board published remarks by Deputy Secretary General Martin Moloney to the 39th ISDA Annual General Meeting, focusing on the FSB’s recent consultation on proposals to address financial stability risks from leveraged position-taking in financial markets. He noted that the FSB is working through 36 consultation responses and expects to reach final recommendations after a couple of months of further work, while stressing that the remarks reflect his views and not necessarily those of the FSB or its members. The remarks highlighted recurring themes in the responses, including the need to recognise the trade-offs given leverage’s role in risk management and market arbitrage, and calls for greater clarity on the consultation’s policy target and the definition of “core markets”. On measurement, he flagged criticism of using gross notional leverage because it does not distinguish hedging from directional positions, but suggested gross notional may still be useful as a first-stage indicator of overall leverage, followed by further analysis to locate where risk sits. He also pushed back on arguments to focus only on large, highly leveraged funds, framing the initiative as targeting a type of trading activity rather than specific entity types, and pointed to the importance of better data, public disclosure and bilateral disclosure to support both supervisory focus and counterparty risk management, including in the context of the Basel Committee’s counterparty credit risk management guidelines. Moloney identified non-cleared margining and collateral haircuts as an outstanding issue still under consideration by FSB members, and linked the case for margin and haircut measures to how much can be achieved through improved data, disclosure and market-by-market analysis. He also noted a consultation argument to wait for other initiatives to take effect, including US Treasury market clearing reforms and the Basel guidance, while observing that jurisdictions will still need time to tailor any agreed recommendations and to reflect on what constitutes their core markets.
Financial Stability Board 2025-05-15
Financial Stability Board Deputy Secretary General reviews leverage consultation feedback as final recommendations near
The Financial Stability Board's Deputy Secretary General, Martin Moloney, addressed the 39th ISDA Annual General Meeting, discussing the FSB's consultation on financial stability risks from leveraged positions. Key themes included the need for clarity on policy targets, defining "core markets," and using gross notional leverage as an initial indicator. Moloney emphasized the importance of data and disclosure for risk management and highlighted ongoing considerations regarding non-cleared margining and collateral haircuts.