Proposed new rules governing bank capital requirements could drain liquidity in key financial markets, according to an ongoing analysis by US lobby group, the Securities Industry Association.
The SIA's research indicates that the proposals laid down in the revised Basel Accord prescribe capital requirements that appear excessive when applied to the activities of internationally active US investment banks.
"These charges could have a detrimental impact on the liquidity of the capital markets," says the SIA in a letter to the regulatory committee drawing up the rule changes.
The new rules will generate capital charges that that are "disproportionate to historical loss experience and managements' perception of the innate risk", states the SIA. Business lines threatened by the rule changes include over-the-counter derivatives trading and stock lending.
The letter also stated that it was premature to impose charges for operational risk, given the amount of work that remains to be done in better understanding and measuring that type of risk.
The SIA suggests that national regulators are given discretion in permitting the use of internal risk assessment models that are more in tune with the mix of risk-sensitive businesses for dealers in the capital markets.
The SIA's complaints echo those other national securities industry groups and add to the pressure on the Basel Committee to tailor the Accord ahead of the proposed deadline for its introduction in 2007.