Banks are sounding the alarm about a proposed global rule aimed at forcing them to fund themselves more safely, warning that it could have "severe" knock-on effects on short selling and other important equities market transactions.
Industry lobbyists have warned the Basel Committee on Banking Supervision that proposed funding rules could make it five times more expensive for banks to facilitate short selling, in which investors bet that share prices will fall.
The rule would also make it much more expensive for banks to provide equity swaps, according to the letter from the Global Financial Markets Association and the Institute of International Finance, two global lobbying groups.
If other financial institutions, so-called shadow banks, do not step into the breach, investors could be forced to pay more to bet on equity price moves.
The banks are making a last-ditch effort to modify the Net Stable Funding Ratio, seen as the final plank of the "Basel III" banking reforms that seek to prevent a repeat of the 2008 financial crisis.