The International Swaps and Derivatives Association (ISDA) highlighted an article by its chief executive, Scott O’Malia, arguing that the draft Basel III endgame package put out for consultation by US regulators in 2023 is calibrated too aggressively and would unduly constrain US banks’ trading activities, with knock-on effects for market liquidity. O’Malia frames bank capital setting as a “balancing act” between avoiding vulnerabilities from insufficient capital and avoiding disproportionately high requirements that limit banks’ capacity to intermediate in financial markets. As Basel III is implemented globally, he argues the US draft risks tipping this balance, citing ISDA analysis of impacts on banks’ trading books, and calls for the calibration flaws to be rectified and for policymakers to assess implications for market functioning and liquidity, including the provision of central clearing.
ISDA 2025-03-20
International Swaps and Derivatives Association urges recalibration of the US Basel III endgame capital proposal to avoid harming market liquidity
The International Swaps and Derivatives Association (ISDA) CEO, Scott O’Malia, criticized the 2023 draft Basel III endgame package by US regulators for being overly stringent, potentially restricting US banks' trading activities and affecting market liquidity. O’Malia emphasized the need to rectify calibration flaws to maintain a balance in bank capital requirements and ensure effective market functioning and liquidity.