ICMA and ISLA submit joint response to US Basel III proposal
22 June 2026 US
Image: Syad/stock.adobe.com
The International Capital Market Association (ICMA) and the International Securities Lending Association (ISLA) have submitted a joint response to the 2026 US Basel III notice of proposed rulemaking.
The submission outlines critical recommendations to ensure that the new capital rules accurately reflect the operational realities of securities financing markets.
The response, drafted with counsel from Clifford Chance, calls for two primary adjustments to the proposed framework: the explicit recognition of modular cross-product netting architectures and a principle-based exemption for bankruptcy-remote pledge models.
Bryan Pascoe, CEO of ICMA, states: 鈥淓fficient repo and securities financing markets are essential to liquid, resilient, and competitive capital markets.
鈥淭he final Basel III framework should recognise the robust legal standards and market infrastructure already in place, including modular cross-product netting arrangements supported by established master agreements such as the GMRA.
鈥淎 proportionate approach will help align regulatory capital treatment with real economic risk, while avoiding unnecessary constraints on market liquidity.鈥�
In terms of the recognition of modular netting, the associations recommend that the agencies amend the final rule text and Form FR Y-15 instructions to explicitly clarify that a 鈥渜ualifying cross-product master netting agreement鈥� can be validly established through an overarching framework like the Cross-Product Master Agreement (CPMA).
This aims to ensure that systemic footprint indicators accurately reflect true net economic exposure rather than artificially inflated figures, preserving vital lending capacity across the financial services market.
For the exemption for bankruptcy-remote pledges, ISLA proposes a principle-based carve-out under the revised Collateral Haircut Approach and the Supplementary Leverage Ratio鈥檚 E-C add-on for transactions where collateral is held in segregated, non-rehypothecatable, bankruptcy-remote accounts, as under the ISLA Pledge structure.
Such structures materially reduce active counterparty credit risk and should not be penalised as if they were traditional, title-transfer exposures, the association added.
These adjustments are intended to preserve market liquidity during periods of financial stress, ensure that the regulatory environment remains fit-for-purpose for the modern, evolving financing ecosystem, and allow financial institutions to deploy capital efficiently to support wider economic stability.
Ina Budh-Raja, CEO of ISLA, comments: 鈥淎s the global implementation of Basel III reaches a critical milestone, it is vital that prudential regulations align capital requirements with the true underlying economics of risk.
鈥淭he CPMA and bankruptcy-remote pledge GMSLA structures are sophisticated, internationally recognised mechanisms that preserve operational continuity and market capacity.
鈥淚t is essential that we preserve the integrity of existing market standards and the unique structural and operational mechanics of natively documented securities financing markets safeguard the uninterrupted flow of vital buy side liquidity into secondary capital markets.鈥�
The submission outlines critical recommendations to ensure that the new capital rules accurately reflect the operational realities of securities financing markets.
The response, drafted with counsel from Clifford Chance, calls for two primary adjustments to the proposed framework: the explicit recognition of modular cross-product netting architectures and a principle-based exemption for bankruptcy-remote pledge models.
Bryan Pascoe, CEO of ICMA, states: 鈥淓fficient repo and securities financing markets are essential to liquid, resilient, and competitive capital markets.
鈥淭he final Basel III framework should recognise the robust legal standards and market infrastructure already in place, including modular cross-product netting arrangements supported by established master agreements such as the GMRA.
鈥淎 proportionate approach will help align regulatory capital treatment with real economic risk, while avoiding unnecessary constraints on market liquidity.鈥�
In terms of the recognition of modular netting, the associations recommend that the agencies amend the final rule text and Form FR Y-15 instructions to explicitly clarify that a 鈥渜ualifying cross-product master netting agreement鈥� can be validly established through an overarching framework like the Cross-Product Master Agreement (CPMA).
This aims to ensure that systemic footprint indicators accurately reflect true net economic exposure rather than artificially inflated figures, preserving vital lending capacity across the financial services market.
For the exemption for bankruptcy-remote pledges, ISLA proposes a principle-based carve-out under the revised Collateral Haircut Approach and the Supplementary Leverage Ratio鈥檚 E-C add-on for transactions where collateral is held in segregated, non-rehypothecatable, bankruptcy-remote accounts, as under the ISLA Pledge structure.
Such structures materially reduce active counterparty credit risk and should not be penalised as if they were traditional, title-transfer exposures, the association added.
These adjustments are intended to preserve market liquidity during periods of financial stress, ensure that the regulatory environment remains fit-for-purpose for the modern, evolving financing ecosystem, and allow financial institutions to deploy capital efficiently to support wider economic stability.
Ina Budh-Raja, CEO of ISLA, comments: 鈥淎s the global implementation of Basel III reaches a critical milestone, it is vital that prudential regulations align capital requirements with the true underlying economics of risk.
鈥淭he CPMA and bankruptcy-remote pledge GMSLA structures are sophisticated, internationally recognised mechanisms that preserve operational continuity and market capacity.
鈥淚t is essential that we preserve the integrity of existing market standards and the unique structural and operational mechanics of natively documented securities financing markets safeguard the uninterrupted flow of vital buy side liquidity into secondary capital markets.鈥�
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