Exploring possible variations in the proposed and final NSFR rule

Exploring possible variations in the proposed and final NSFR rule

Ahead of the Liquidity Risk Management Congress, Ishan Lal, Director at Credit Suisse has provided us with his insight on preparing for NSFR ahead of implementation. 

Ishan, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

Member of Credit Suisse’s Prime Services business. Key activities include helping manage collateral, liquidity and funding across Equities business lines, focusing on capital resource management, secured funding and collateral trading.

At the Liquidity Risk Management Congress, you will be speaking on your insight regarding – NSFR Final Rule. Why do you believe this is a key talking point in the industry right now?

Basel III regulations clearly drive the need for more stringent capital, leverage and liquidity requirements. These changes can impact the cost of operating individual businesses and make it even more critical for banks to allocate resources in the most efficient manner.

In your experience, how can financial institutions best manage adapting the business to the final rule in a shortened time frame?

Banks are adapting by focusing both on internal structural changes as well as proactively working with clients to optimize use of resources. Specific examples include reducing leverage exposure, prioritizing clients, and ensuring balance sheet is appropriately priced.

What are the essential considerations that need to be made when preparing ahead of implementation?

As is typical in a fluid process, impacted institutions need to have a sense for the following: 1) how regulatory bodies across major regions are thinking through their key issues, 2) to what extent do they actively work with one another to try to achieve consensus of thought, and 3) what is the level of engagement they each have with industry participants who are allowed to express their business opinions.

Can you give a brief overview of what the final rule will look like for foreign banking organizations?

We are hopeful that regulators are processing industry feedback in a thoughtful and methodical manner and will work together to develop a final ruling that provides a global playing field for all participants.

What, in your opinion does the future hold for liquidity risk professionals, and how can they keep up the increasing change?

It’s critical that to maintain strong lines of communication amongst industry peers as well as lead active industry lobbying efforts to engage regulators on our key concerns. As much as possible, setting up informal calls and gatherings can be extremely useful for soliciting one another’s views, and formulating and sharpening our own evolving thinking.