ISDA Urges Use of ‘Fuller’ Liquidity Risk Model
The International Swaps and Derivatives Association is pushing for regulators to use a “fuller” model to measure liquidity risk outlined in an international plan for stricter capital standards for trades.
ISDA believes the fuller risk model, which more closely resembles ones larger banks currently use internally, “is a better one,” said Peter Sime, head of risk and research at ISDA.
“As an industry, we are saying that when firms have developed their own internal models after the crisis, and refined them considerably, and already sunk massive costs and resources into them, then we think the firms should be able to use” standardized approaches that more closely reflect their internal models, said Sime, whose association represents financial institutions and professionals in the OTC derivatives market. He said “we appreciate that with smaller banks, they may wish to use a partial model.”