HFSC GOP ask Fed to protect risk tool

First in The Vault: A group of House Republicans led by Rep. John Rose (Tenn.) is urging the Federal Reserve to preserve banks’ ability to manage risk using credit-linked notes.

In a letter dated Friday, GOP lawmakers urged the Fed to “efficiently, yet thoroughly,” review banks’ applications to receive certain types of capital treatment on credit-linked notes. This is a form of balance sheet management known in the industry as “synthetic risk transfer.”

That sounds complicated – and it is! – but this is just another battlefield in the banking industry’s war against Basel III capital reform.