AFG responds to the FSB consultation on leverage in non-bank financial institutions (NBFIs).

In this consultation, the FSB (Financial Stability Board) is seeking views on proposed recommendations aimed at better supervising the financial stability risk arising from leverage in the non-bank financial institutions sector.

In its response, the AFG stresses several points:

Finally, she stresses the need to focus on risks arising from unregulated players.

• It reiterates the soundness of the European framework for supervising leverage-related risks.

• It calls for greater transparency and predictability in the rules governing margin calls in cleared transactions.

• It is also proposing the use of high-quality securities in addition to cash for margin calls. This would limit forced sales during market stress and the associated pro-cyclical effects.