Monday, November 11, 2013

FSB Launches Second Phase of Its Securities Lending and Repo Study

On November 5, 2013, the Financial Stability Board (FSB) launched the second stage of its two-stage quantitative impact study on the proposed regulatory framework for securities financing transactions.  As you may recall, on August 29, 2013, the FSB published the results of the first stage of its look into securities finance. The report, Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos, sets out policy recommendations for addressing financial stability risks in relation to securities lending and repos. These measures formed part of an overall set of policy recommendations to strengthen oversight and regulation of shadow banking, an overview of which was published on the same date. 

The second prong of the FSB's look into securities finance will be a more comprehensive quantitative assessment of the effect of the FSB's earlier haircut proposals on a broader set of firms.  The study will look into both the effects of the proposed minimum standards for methodologies used by firms in calculating their own haircuts and the numerical haircut floors to be applied to certain securities financing transactions.

This second study will employ a quantitative data collection template and a questionnaire to be completed by:



1.  Regulated financial intermediaries (banks and broker-dealers). Financial intermediaries that are subject to prudential liquidity and capital regulation. These entities should fill out the Bank/Broker-Dealer template and refer to the Bank/Broker-Dealer instructions.
2.  Agent securities lenders. Entities that lend securities on behalf of clients. These entities should fill out the Agent Lender template and refer to the Agent Lender instructions.
3.  Non-banks. Entities that do not fit either of the above categories, and would include asset managers, insurance companies, pension funds and hedge funds, among others, that obtain financing using securities financing transactions. These entities should fill out the Non-bank template and refer to the Non-bank instructions.

The data template and questionnaire are entirely voluntary, of course, and the FSB is inviting interested market participants to contact





The FSB is inviting interested market participants to voluntarily participate in the exercise. Interested firms should notify an FSB member national authority (in the case of regulated financial intermediaries) or the FSB Secretariat (in the case of agent lenders and non-banks) of their interest by 15 November. As in the case of QIS1, all data will be treated as strictly confidential, anonymised for global analysis (except for the name of the jurisdiction where the headquarters is located and the type of entity) and used only for the purpose of assessing the impact of the minimum haircut proposals and refining these proposals. 



Interested firms are asked to complete the templates and respond to the questionnaire by 23 December 23, 2013. Analysis of the questionnaire and data templet responses will help the FSB refine and finalize its recommendations by the second quarter of 2014.