PCS filed its response to the European Banking Authority's consultation paper on synthetic excess spread. Although this might appear the most abstruse of technical issues, fit only for quants and CRR geeks, the truth is - as PCS sets out in the introduction to its response - that this highly technical matter will have substantially damaging effects on the European economy as a whole if not properly calibrated.
Unfortunately, PCS feels that the current EBA proposals are indeed not only miscalibrated but would result in the virtual eradication of the use of synthtetic excess spread in Europe. This, we feel, is unnecessary as our response - and those of others - sets out a solution which entirely eliminates the legitimate concerns of policy makers regarding the abuse of synthetic excess spread without making its use practically impossible.
Even if you do not wish to plunge deeply in the technicalities, we do invite you to read our response as it does try, as best one can, to make the issue understandable.